[Federal Register Volume 67, Number 78 (Tuesday, April 23, 2002)]
[Proposed Rules]
[Pages 19914-19930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9455]



[[Page 19913]]

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Part VI





Securities and Exchange Commission





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17 CFR Parts 230, 239 and 249



Form 8-K Disclosure of Certain Management Transactions; Proposed Rule

  Federal Register / Vol. 67, No. 78 / Tuesday, April 23, 2002 / 
Proposed Rules  

[[Page 19914]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 239 and 249

[Release No. 33-8090; 34-45742; File No. S7-09-02]
RIN 3235-AI43


Form 8-K Disclosure of Certain Management Transactions

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing amendments that would require some public 
companies to file current reports describing: directors' and executive 
officers' transactions in company equity securities, directors' and 
executive officers' arrangements for the purchase and sale of company 
equity securities, and loans of money to a director or executive 
officer made or guaranteed by the company or an affiliate of the 
company. The purpose of the proposed amendments is to provide investors 
with prompt disclosure of this information, so that investors will be 
able to make investment and voting decisions on a better-informed and 
more timely basis.

DATES: Comments should be received on or before June 24, 2002.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, 
NW, Washington, DC 20549-0609. Comments also may be submitted 
electronically at the following electronic mail address: [email protected]. All comment letters should refer to File No. S7-09-
02; this file number should be included in the subject line if 
electronic mail is used. Comment letters will be available for public 
inspection and copying in the Commission's Public Reference Room, 450 
Fifth Street, NW, Washington, DC 20549. Electronically submitted 
comment letters will be posted on the Commission's Internet Web Site 
(http://www.sec.gov).\1\
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    \1\ We do not edit personal identifying information, such as 
names or electronic mail addresses, from electronic submissions. You 
should submit only information that you wish to make available 
publicly.

FOR FURTHER INFORMATION CONTACT: Anne M. Krauskopf, Special Counsel, at 
(202) 942-2900, or Mark A. Borges, Special Counsel, at (202) 942-2910, 
Division of Corporation Finance, U.S. Securities and Exchange 
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Commission, 450 Fifth Street, NW, Washington, DC 20549-0312.

SUPPLEMENTARY INFORMATION: We are proposing amendments to Form 8-K \2\ 
under the Securities Exchange Act of 1934 (``Exchange Act''),\3\ and 
related amendments to Rule 144 \4\ and Forms S-2,\5\ S-3,\6\ and S-8 
\7\ under the Securities Act of 1933 (``Securities Act'').\8\
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    \2\ 17 CFR 249.308.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 230.144.
    \5\ 17 CFR 239.12.
    \6\ 17 CFR 239.13.
    \7\ 17 CFR 239.16b.
    \8\ 15 U.S.C. 77a et seq.
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I. Executive Summary

    In order to keep current the information required to be included in 
the registration statement under Section 12 of the Exchange Act,\9\ 
Exchange Act Section 13(a) \10\ requires every issuer of a security 
registered under Section 12 to file such information as the Commission 
may prescribe by rule ``as necessary or appropriate for the proper 
protection of investors and to insure fair dealing in the security.'' 
For these purposes, our rules require annual reports on Forms 10-K and 
10-KSB,\11\ quarterly reports on Forms 10-Q and 10-QSB,\12\ and current 
reports on Form 8-K.\13\ Similar disclosure must be provided in the 
proxy statement for the annual meeting at which directors are elected 
required by the rules under Exchange Act 14(a) \14\ because it is 
material to shareholders' voting decisions. We also require reporting 
companies to file these reports and proxy statements in electronic 
format.\15\
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    \9\ 15 U.S.C. 78l.
    \10\ 15 U.S.C. 78m(a).
    \11\ 17 CFR 249.310 and 17 CFR 249.310b, respectively. 
Generally, Exchange Act Rules 13a-1 [17 CFR 240.13a-1] and 15d-1 [17 
CFR 240.15d-1] require issuers with securities registered under 
Section 12 of the Exchange Act and issuers subject to the reporting 
requirements of Section 15(d) of the Exchange Act [15 U.S.C. 78o(d)] 
to file such annual reports.
    \12\ 17 CFR 249.308a and 17 CFR 249.308b, respectively. 
Generally, Exchange Act Rules 13a-13 [17 CFR 240.13a-13] and 15d-13 
[17 CFR 240.15d-13] requires issuers with securities registered 
under Section 12 of the Exchange Act and issuers subject to the 
reporting requirements of Section 15(d) of the Exchange Act to file 
such quarterly reports.
    \13\ Generally, Exchange Act Rule 13a-11 [17 CFR 240.13a-11] 
requires issuers with securities registered under Section 12 of the 
Exchange Act to file a current report on Form 8-K within the period 
specified by the form, unless the issuer previously reported 
substantially the same information. Exchange Act Rule 15d-11 [17 CFR 
240.15d-11] generally applies the same requirement to issuers 
subject to the reporting requirements of Section 15(d) of the 
Exchange Act.
    \14\ 15 U.S.C. 78n(a), which authorizes Regulation 14A [17 CFR 
240.14a-1 et seq].
    \15\ Rule 101(a)(1)(iii) of Regulation S-T [17 CFR 
232.101(a)(1)(iii)].
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    We propose to amend Form 8-K under the Exchange Act to require 
companies with a class of equity securities registered under Exchange 
Act Section 12 to report information about:
     Directors' and executive officers' transactions in company 
equity securities (including derivative securities transactions and 
transactions with the company);
     Directors' and executive officers' arrangements for the 
purchase or sale of company equity securities intended to satisfy the 
affirmative defense conditions of Exchange Act Rule 10b5-1(c); \16\ and
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    \16\ 17 CFR 240.10b5-1(c).
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     Loans of money to directors and executive officers made or 
guaranteed by the company or an affiliate of the company.
    Reports of transactions and loans with an aggregate value of 
$100,000 or more would be due within two business days.
    Reports of transactions and loans with a smaller aggregate value, 
grants and awards pursuant to employee benefit plans, and Rule 10b5-1 
arrangements generally would be due by the close of business on the 
second business day of the following week. However, reports of 
transactions and loans with an aggregate value less than $10,000 would 
be deferrable until the aggregate cumulative value of those unreported 
events for the same director or executive officer exceeds $10,000.

II. Background

    A company's registration statement on Form 10 or Form 10-SB \17\ to 
register a class of equity securities under Section 12 of the Exchange 
Act must identify management and include information about management's 
business experience, executive compensation, management's security 
ownership, and management's transactions with and indebtedness to the 
company.\18\ This required disclosure provides investors with 
information about:
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    \17\ 17 CFR 249.210 and 17 CFR 249.210b, respectively. Form 8-A 
[17 CFR 249.208a] is available for the same purpose for an issuer 
that is already subject to a reporting requirement under Section 13 
or Section 15(d) of the Exchange Act. Form 8-A is an abbreviated 
form that does not require these issuers to repeat information they 
previously filed.
    \18\ Items 401, 402, 403, and 404 of Regulations S-K [17 CFR 
229.401, 402, 403, and 404] and S-B [17 CFR 228.401, 402, 403, and 
404]. Respectively, they comprise Items 5, 6, 4, and 7 of Form 10 
and Form 10-SB.
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     Executive compensation paid in the form of securities;
     The extent to which management's economic interests are 
aligned with those of shareholders through ownership of company equity 
securities; and
     Management's transactions with and relationships to the 
company

[[Page 19915]]

beyond the scope of employment that could affect management's 
performance of its duties.

Changes in securities ownership and some management transactions that 
are disclosed also can provide information regarding management's view 
of the company's performance and prospects.
    Under current regulations, the information must be updated annually 
in the company's annual report on Form 10-K or Form 10-KSB.\19\ The 
information may be incorporated by reference from the company's 
definitive proxy statement for the annual meeting at which directors 
are elected, where similar disclosure also is required because it is 
material to shareholders' voting decisions.\20\ We do not propose to 
revise those disclosure requirements in this rulemaking.
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    \19\ Items 10, 11, 12, and 13 of Form 10-K and Items 9, 10, 11, 
and 12 of Form 10-KSB.
    \20\ Items 6, 7, and 8 of Schedule 14A [17 CFR 240.14a-101]. The 
proxy statement also includes additional executive compensation 
disclosure that addresses the relationship between executive 
compensation and a company's equity securities performance. This 
information is not deemed incorporated by reference into any filing 
under the Securities Act or the Exchange Act, except to the extent 
specifically incorporated by reference.
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    However, advances in technology and the increased dependence on the 
ready availability of current corporate information have reshaped the 
way our markets operate. Technological developments that significantly 
reduce timeframes for the capture and analysis of information 
necessitate a new consideration of the timing of mandated disclosure to 
the markets. We believe it would enable investors to make investment 
and voting decisions on a more timely and better informed basis, 
provide more timely information regarding management's view of company 
performance or prospects, protect investors, and promote fair dealing 
in company equity securities if companies were required to report 
additional information related to these subjects on a more current 
basis. To this end, we propose to amend Form 8-K.
    Some of the information that a company would report with respect to 
directors' and executive officers' transactions in company equity 
securities also is reportable by officers and directors under Section 
16(a) of the Exchange Act.\21\ However, Section 16(a) requires 
disclosure that may be filed too slowly for the public to obtain the 
maximum benefit from the information,\22\ and the reports are not 
always readily accessible because they are not required to be filed 
electronically.\23\ As described below, the proposal would require the 
company to report electronically significant information concerning 
transactions that may reveal directors' and executive officers' views 
as to company prospects.\24\ We believe that these proposed reports 
would protect investors and promote fair dealing in the company's 
securities by enabling investors to make informed decisions on a more 
timely basis. As proposed, the categories of transactions to be 
reported currently on Form 8-K would not replicate all the transactions 
that officers and directors must report under Section 16(a), but only 
those most related to the purpose of the newly proposed current 
disclosure.
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    \21\ 15 U.S.C. 78p(a).
    \22\ Section 16(a) establishes that reports on Form 4 [17 CFR 
249.104] are due within 10 days after the close of the month in 
which the reportable transaction occurs, creating a delay of 10 to 
40 days. Reports on Form 5 [17 CFR 249.105], which applies to most 
transactions between an officer or director and the company, are due 
within 45 days after the company's fiscal year end, creating a delay 
of up to 410 days between a reportable transaction and filing. 
Exchange Act Rule 16a-3(f)(1) [17 CFR 240.16a-3(f)(1)].
    \23\ The Commission has permitted voluntary EDGAR filing of 
these reports since 1995. Securities Act Release No. 7231 (Oct. 5, 
1995) [60 FR 53474]. In Securities Act Release No. 7803 (Feb. 25, 
2000) [65 FR 11507], the Commission stated that it intends to engage 
in future rulemaking to make the filing of Section 16(a) forms on 
EDGAR mandatory.
    \24\ The relationship between management's transactions and 
company equity securities performance has been the subject of 
significant study. See J. Lakonishok and I. Lee, ``Are Insiders' 
Trades Informative?,'' Review of Financial Studies, Vol. 14, Issue 1 
(Spring 2001).
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    Moreover, the Section 16(a) filings do not report two categories of 
information--directors' and executive officers' arrangements under 
Exchange Act Rule 10b5-1 and their receipt of loans from, or guaranteed 
by, the company or an affiliate of the company--that we believe also 
are of significant informational value and should be reported on a 
current basis.\25\ Because this information, like information 
concerning directors' and executive officers' transactions, relates to 
both the market for company equity securities and directors' and 
executive officers' relationship to the company, we propose to require 
companies to report this information on Form 8-K.
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    \25\ Item 404 of Regulations S-K and S-B requires disclosure of 
any director or executive officer's indebtedness to the company or 
its subsidiaries at any time since the beginning of the company's 
last fiscal year in an amount in excess of $60,000. This disclosure, 
which is filed annually on Form 10-K or Form 10-KSB and the proxy 
statement for the annual meeting at which directors are elected, 
does not address issues involving use of company equity securities 
as collateral.
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III. Proposed Changes

A. Addition of New Form 8-K Item

    We propose to amend the current report on Form 8-K to add Item 10, 
which would require companies with a class of equity securities 
registered under Section 12 to report on Form 8-K:
     Each director's and executive officer's transactions in 
company equity securities (whether or not of the class registered under 
Section 12), including the acquisition and disposition of derivative 
securities, and the exercise, termination or settlement of derivative 
securities;
     Each director's and executive officer's adoption, 
modification or termination of a contract, instruction or written plan 
for the purchase or sale of company equity securities intended to 
satisfy the affirmative defense conditions of Exchange Act Rule 10b5-
1(c); \26\ and
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    \26\ For purposes of insider trading liability under Section 
10(b) of the Exchange Act [15 U.S.C. 78j(b)] and Exchange Act Rule 
10b-5 [17 CFR 240.10b-5], Rule 10b5-1 provides that ``a purchase or 
sale of a security of an issuer is `on the basis of ' material 
nonpublic information about that security or issuer if the person 
making the purchase or sale was aware of the material nonpublic 
information when the person made the purchase or sale.'' Compliance 
with the affirmative defense conditions of Rule 10b5-1(c) allows a 
person to plan securities transactions in advance while not aware of 
material nonpublic information, and later execute the transactions 
as planned without Section 10(b) and Rule 10b-5 liability, even if 
aware of material nonpublic information at the time a planned 
transaction occurs.
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     Each loan of money to a director or executive officer made 
or guaranteed by the company or an affiliate of the company.
    Current reports of information regarding changes in directors' and 
executive officers' holdings of company equity securities might in some 
cases reveal shifts in the alignment between management's and 
shareholders' economic interests. Such reports, particularly with 
respect to derivative securities used by directors and executive 
officers for hedging purposes, also could disclose in some cases 
transactions by directors and executive officers that might be 
construed as severing the link between executive compensation and 
company equity securities performance.
    Moreover, current reports of information regarding directors' and 
executive officers' transactions in company equity securities would 
provide public investors timely disclosure of potentially useful 
information as to management's views of the performance or prospects of 
the company. Many public investors take

[[Page 19916]]

the position that timely disclosure of these transactions is necessary 
for them to make informed investment decisions.\27\
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    \27\ See, e.g., J. Moreland, ``Two Modest Proposals for Fixing 
Insider Trading Rules,'' TheStreet.Com (Feb. 11, 2002); T. Mulligan, 
``Calls for Faster, Fuller Disclosure by Insiders,'' Los Angeles 
Times (Mar. 3, 2002); A. Sloan, ``One Enron Lesson: Some Insider 
Trading Falls Outside the Timely-Reporting Rule,'' Washington Post 
(Mar. 5, 2002); and A. Beard, ``Insiders'' Trades Spark Outsiders' 
Interest,'' Financial Times (Apr. 8, 2002).
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    Similarly, current reports disclosing that a director or executive 
officer has entered into, modified or terminated a Rule 10b5-1 
contract, instruction or written plan for the purchase or sale of 
company equity securities may provide investors with more extensive 
disclosure of potentially useful information as to management's views 
of the performance and prospects of the company. Finally, current 
reports of company (or company affiliate) loans and guarantees of 
third-party loans to directors and executive officers would inform 
investors of financial arrangements not generally available to 
shareholders that may result in the receipt of de facto additional 
compensation by the director or executive officer.
1. Covered Directors and Executive Officers
    A company would be required to report under Item 10 with respect to 
all directors and executive officers. For purposes of the proposal, 
``executive officer'' would be defined by Exchange Act Rule 3b-7.\28\ 
This is the same definition that applies for purposes of management 
disclosure in Forms 10, 10-SB, 10-K, 10-KSB, and Schedule 14A.
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    \28\ 17 CFR 240.3b-7.
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    For purposes of Section 16, our rules define ``officer'' 
similarly.\29\ However, Section 16 ``officers'' also specifically 
include principal financial officers and principal accounting officers 
(or controllers where there is no principal accounting officer), and 
officers of the company's parent(s) or subsidiaries if they perform 
significant policy-making functions for the issuer.
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    \29\ Exchange Rule 16a-1(f) [17 CFR 240.16a-1(f)]. Further, a 
note to Rule 16a-1(f) establishes a presumption that a person whom 
the company identifies as an ``executive officer'' pursuant to Item 
401(b) of Regulation S-K is an ``officer'' for purposes of Section 
16.
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    Unlike other company disclosure obligations and insiders' Section 
16(a) reporting obligations, the proposed Item 10 reports would apply 
only with respect to directors and executive officers, and not to 
principal security holders. In contrast, a company must report share 
ownership by persons who beneficially own more than five percent of any 
class of the registrant's voting securities\30\ in the registration 
statement on Form 10 or Form 10-SB,\31\ update it annually in the 
annual report on Form 10-K or Form 10-KSB,\32\ and include it in the 
definitive proxy statement for the annual meeting at which directors 
are elected.\33\ Beneficial owners of more than ten percent of a class 
of equity securities registered under Section 12 \34\ are subject to 
Section 16 of the Exchange Act.
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    \30\ Beneficial owners of more than five percent of a class of 
equity securities registered under Section 12 are subject to the 
reporting requirements of Section 13(d) of the Exchange Act [15 
U.S.C. 78m(d)].
    \31\ Item 403 of Regulations S-K and S-B, and Item 4 of Forms 10 
and 10-SB.
    \32\ Item 12 of Form 10-K and Item 11 of Form 10-KSB.
    \33\ Item 6 of Schedule 14A.
    \34\ As defined in Exchange Act Rule 16a-1(a)(1) [17 CFR 
240.16a-1(a)(1)].
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    However, these beneficial owners may not be subject to the same 
fiduciary duties to the company as directors and executive officers, 
and do not receive compensation from the company. Further, the 
company's relationship to these beneficial owners, which in some cases 
may even be hostile, does not necessarily facilitate current reporting 
by the company. Accordingly, the proposal would not require a company 
to report transactions in company equity securities (or other Item 10 
events) by major shareholders who are not also directors or executive 
officers.
    Questions regarding what persons' Item 10 events should be 
reported:
     Is the Rule 3b-7 definition the appropriate definition of 
``executive officer'' for purposes of the proposal?

--In practice, do companies generally identify principal financial 
officers, principal accounting officers, and controllers as Rule 3b-7 
``executive officers'?
--If not, should companies also be required specifically to report with 
respect to these officers under Item 10?
--Should Item 10 reporting apply with respect to directors who are not 
also executive officers?
--Are investors as interested in transactions by these directors? What 
about their Rule 10b5-1 arrangements and loans made to them (or 
guaranteed by) the company or its affiliates?
--Does reporting with respect to these directors provide additional 
concerns for issuers?
--Does Section 16 reporting by these directors provide sufficiently 
timely information for issuers?

     Do investors need to know about more than ten percent 
beneficial owners' transactions earlier than those transactions are 
reportable under Section 16(a)?

--Would companies reasonably be able to implement procedures and 
systems to report with respect to more than ten percent beneficial 
owners under Item 10?
--What would be the impact on more than ten percent beneficial owners 
of extending the Item 10 requirement with respect to them?

     Are there any other persons whose transactions and other 
events should be expressly included in (or excluded from) the proposal?
2. Reporting Deadlines
    As proposed, most Item 10 events would be reportable early in the 
week following the event. However, events that would be of heightened 
significance to investors would be reportable on an accelerated basis, 
and de minimis events would be reportable on a deferred basis. 
Specifically:
     An Item 10 Form 8-K would be due within two business days 
following a transaction or loan with an aggregate value of $100,000 or 
more with respect to a director or executive officer, other than a 
grant or award pursuant to an employee benefit plan.
     Employee benefit plan grants and awards, transactions and 
loans with an aggregate value less than $100,000, and Rule 10b5-1 
arrangements generally would be reportable not later than the close of 
business on the second business day of the week following the week in 
which the event occurred.
     The report of a transaction or loan with an aggregate 
value not exceeding $10,000 could be deferred until the aggregate 
cumulative value of unreported transactions and loans with respect to 
the same director or executive officer exceeds $10,000.
    The date of a reportable event would be the date on which the 
parties enter into an agreement. For example, in the case of a sale of 
securities to the company or a loan from the company, the date would be 
the date of the agreement and not the date of completion of the sale or 
making of the loan. In the case of a line of credit or similar lending 
arrangement, both the date of entering into the arrangement and the 
date of a loan under that arrangement would be reportable. In the case 
of an open market securities transaction, the date would be the trade 
date and not the settlement date. In the case of a Rule 10b5-1 
arrangement, the date would be the date on which the

[[Page 19917]]

arrangement is made, modified or terminated.
    The proposed deadlines are designed to balance the significance to 
investors of the reportable information and the company's reporting 
burden. The two business day accelerated deadline is intended to 
provide investors with rapid disclosure of the most significant events, 
while allowing the company sufficient time to compile the required 
information. The next week deadline is intended to provide investors 
with timely disclosure, while facilitating the company's ability to 
report on a single Form 8-K multiple events in the same time frame with 
respect to more than one director or executive officer. The deferred 
deadline would allow the company to defer reporting events that, by 
virtue of relatively low aggregate value, would presumably be less 
significant to investors. All transactions reportable on the same day 
could be filed on a single Form 8-K under Item 10.
    The $100,000 and $10,000 thresholds would apply to the aggregate 
value of the reportable transaction or loan. These dollar thresholds 
are intended to tailor the reporting requirements based upon the size 
of the event and the presumed significance of the information to 
investors. The thresholds would apply to employee benefit plan 
transactions other than grants and awards, such as option exercises, 
volitional intra-plan transfers involving a company equity securities 
fund, and deferral of cash compensation in phantom stock units. For 
physically-settled derivative securities, the aggregate value would be 
computed by reference to the market value of the underlying securities 
on the date of the transaction. For cash-settled derivative securities, 
the aggregate value would be computed based on the transaction's 
notional value.\35\ Where exercise or tax withholding rights or other 
net settlement procedures are used in the exercise, conversion or other 
settlement of a derivative security, the aggregate value would be 
computed on a gross basis.
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    \35\ Notional value generally refers to the gross value of the 
securities or other assets from which the cash-settlement value is 
calculated.
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    As a practical matter, a company would need to institute procedures 
and systems to assure Item 10 compliance. The general instruction would 
include a Commission finding that it is not in the public interest to 
impose any sanction on a company, notwithstanding a violation, that 
demonstrates that:
    (1) At the time of the violation, it had designed procedures and a 
system for applying such procedures sufficient to provide reasonable 
assurances that Item 10 events are timely reported;
    (2) At the time of the violation, the company followed those 
procedures; and
    (3) As promptly as reasonably practicable, the company made a 
filing to correct any violation.\36\
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    \36\ Proposed amendment to General Instruction B.1 to Form 8-K.
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This provision is intended to provide protection against sanctions for 
companies that experience isolated failures to comply notwithstanding 
appropriate procedures. Repeated or systemic violations or those that 
otherwise are not isolated would suggest deficiencies in procedures or 
their application that would be inconsistent with availability of the 
provision. In addition, where the company makes the demonstration 
described above, the Commission nevertheless could proceed against a 
director or executive officer. As with other Section 13(a) violations, 
a private right of action would not arise.
    Questions regarding implementation and costs:
     Will companies subject to Item 10 be able to implement 
reasonable procedures to prepare and file Item 10 Forms 8-K under these 
proposed deadlines?
     To what extent will companies be able to make use of 
existing procedures to compile and report directors' and executive 
officers' transaction information?
     What additional costs will companies incur to compile 
information and convert it into electronic format for filing?
    Questions regarding appropriateness of proposed reporting deadlines 
and dollar thresholds:
     Do the proposed deadlines and thresholds appropriately 
balance investors' informational needs and the company's reporting 
burden?
     Is $100,000 with respect to transactions by or loans to a 
single director or executive officer an appropriate threshold for 
requiring reporting within two business days?

--Would either a higher or lower dollar threshold, such as $60,000 \37\ 
or $150,000, better quantify events of sufficient significance to 
investors to warrant accelerated reporting?
--Should the proposed two business days deadline be either shorter or 
longer (such as one or three business days)?

    \37\ Item 404(a) of Regulations S-K and S-B generally requires 
disclosure of a company's transactions with management in which the 
amount involved exceeds $60,000.
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     Are there criteria other than aggregate dollar value that 
should determine what events should be reported within the accelerated 
deadline?

--For example, should the accelerated deadline always apply regardless 
of dollar value if the reportable event is a transaction with the 
company or a loan from (or guaranteed by) the company?
--Should foreclosure on or forgiveness of a loan from (or guaranteed 
by) the company always be reportable within two business days?

     Should aggregate dollar value determine the reporting 
deadline for additional events?

--Should the deadline for reporting a Rule 10b5-1 arrangement be 
determined based on the aggregate proposed transaction price or 
aggregate market value of the securities subject to purchase or sale 
under the arrangement, in the same manner as proposed for transactions 
and loans?
--Similarly, should the deadline for reporting grants and awards under 
employee benefit plans be based on the aggregate value of the grant or 
award?

     Should the close of business on the second business day of 
the week following the event be the deadline for more (or all) Item 10 
reports?

--Are there employee benefit plan transactions other than grants and 
awards for which this deadline would be appropriate?
--Should this deadline be shorter or longer, such as the first or third 
`` rather than the second `` business day of the week following the 
event?
--Are there any events for which a longer period, such as five business 
days after the event, would be an appropriate reporting deadline?

     Is $10,000 an appropriate threshold for permitting 
deferred reporting of smaller events? \38\

    \38\ The proposed $10,000 threshold is similar to the $10,000 
threshold for deferred reporting of small acquisitions under 
Exchange Act Rule 16a-6 [17 CFR 240.16a-6]. However, the proposed 
Item 10 deferred reporting threshold would not be limited to 
acquisitions.
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--Would a different amount, such as $20,000 or $30,000, better quantify 
de minimis events which might not be of significant interest to 
investors?
--Should this dollar threshold vary depending on whether the reportable 
event is a transaction with or a loan from (or guaranteed by) the 
company?
--Should there be a maximum aggregation period for smaller events 
beyond which reporting could no longer be deferred? If so, what would 
be an appropriate period?

[[Page 19918]]

--Instead should reports of all transactions less than $100,000 be 
deferred until their aggregate cumulative value equals $100,000?
--Are there any categories of events that should be ineligible for 
deferred reporting?

    As a general matter, would the clarity provided by establishing 
reporting deadlines based on aggregate value outweigh the 
administrative burden of tracking aggregate value?
    Questions regarding application of dollar thresholds to specific 
transactions:
     To prevent evasion, should transactions or loans that 
occur within the same two business day period be considered together 
for purposes of computing the dollar threshold for reporting under the 
earlier deadline?

--Should there be a longer (or shorter) aggregation period?

     Where the exercise of an option is followed by a 
disposition of the underlying securities, should the aggregate value be 
computed by reference solely to the disposition, rather than by adding 
the fair market value of the acquired securities to the dollar amount 
of the disposition?
    Questions regarding proposed Commission finding:
     Does the proposed finding appropriately address company 
liability for violations?
     Should companies be required to disclose, for example in 
the annual report on Form 10-K, any director's or executive officer's 
failure to comply with procedures that the company has implemented to 
provide reasonable assurances that Item 10 events are timely reported?
3. Covered Companies
    As proposed, only issuers with a class of equity securities 
registered under Section 12 would be subject to Item 10. These 
companies comprise a significant portion of U.S. equity markets. 
Moreover, these would be the same companies whose officers, directors, 
and more than ten percent beneficial owners are required to report 
transactions in company equity securities pursuant to Section 16(a). 
Many of these companies help their officers and directors fulfill their 
Section 16(a) reporting obligations, and accordingly already may have 
procedures in place that would assist them in providing Item 10 
disclosure.\39\ Such procedures, including in some cases requirements 
that directors and executive officers give advance notice or receive 
advance approval of transactions, would help companies keep track of 
transactions that would be reportable under Item 10.
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    \39\ For example, these companies are likely to have established 
procedures to comply with their obligation to disclose Section 16 
reporting persons' failure to timely file Section 16(a) reports. 
This reporting obligation is set forth in Item 405 of Regulations S-
K and S-B [17 CFR 229.405 and 17 CFR 228.405, respectively], and is 
required disclosure in the annual report on Form 10-K or Form 10-KSB 
and the proxy statement for the annual meeting at which directors 
are to be elected.
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    Questions regarding covered companies:
     Should companies required to report with respect to a 
class of equity securities solely under Section 15(d) also be subject 
to Item 10 reporting?

--Is Item 10 information necessary for timely, well-informed investment 
decisions with respect to equity securities of these issuers?

     Alternatively, should small business issuers \40\ with a 
class of equity security registered under Section 12 be exempted from 
Item 10 because compliance would impose excessive burdens?
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    \40\ Exchange Act Rule 12b-2 [17 CFR 240.12b-2] defines a 
``small business issuer'' as a U.S. or Canadian issuer, other than 
an investment company, that has revenues of less than $25 million, 
if the aggregate market value of its outstanding voting and non-
voting common equity held by non-affiliates is not $25 million or 
more. If the issuer is a majority-owned subsidiary, it is not a 
small business issuer unless the parent corporation also is a small 
business issuer.
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4. Filed Status of Reports
    As proposed, Item 10 Forms 8-K would be considered ``filed'' for 
purposes of liability under Section 18 of the Exchange Act.\41\ 
Consequently, Item 10 information would be incorporated by reference in 
Securities Act registration statements on Forms S-2, S-3, S-8, and S-4 
(where Form S-2 or S-3 level disclosure is used).\42\ However, we are 
proposing amendments to the applicable registration statement form 
instructions and Securities Act Rule 144 so that an Item 10 Form 8-K 
delinquency would not affect form eligibility or the company's current 
reporting status under Rule 144(c).\43\
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    \41\ 15 U.S.C. 78r.
    \42\ 17 CFR 239.25.
    \43\ Proposed amended General Instruction I.C to Form S-2, 
General Instruction I.A.3 to Form S-3, General Instruction A.1 to 
Form S-8, and Securities Act Rule 144(c).
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    As proposed, Item 10 Forms 8-K would be subject to General 
Instruction B.3 to Form 8-K. This instruction provides that if 
substantially the same information required by Form 8-K has been 
previously reported by the company, an additional report need not be 
made on Form 8-K.\44\
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    \44\ For this purpose, ``previously reported'' is defined in 
Rule 12b-2 [17 CFR 240.12b-2] to mean previously filed with, or 
reported in a statement under Section 12 of the Exchange Act, a 
report under Section 13 or 15(d) of the Exchange Act, a definitive 
proxy statement or information statement under Section 14 of the 
Exchange Act, or a registration statement under the Securities Act.
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    Questions regarding ``filed'' status of reports:
     Should Item 10 Forms 8-K not be considered ``filed'' (and 
hence not subject to Section 18 liability) unless the company 
specifically states that the information is to be considered ``filed'' 
under the Exchange Act or incorporates it by reference into a filing 
under the Securities Act or Exchange Act? \45\
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    \45\ General Instruction B.2 to Form 8-K provides this treatment 
for current Item 9 Forms 8-K. These forms report information that a 
company elects to disclose through Form 8-K pursuant to Regulation 
FD [17 CFR 243.100-243.103].
---------------------------------------------------------------------------

     Alternatively, if an Item 10 Form 8-K is considered 
``filed'' as proposed, should a delinquency adversely affect either the 
company's eligibility to use short-form Securities Act registration 
statements or its current reporting status under Rule 144(c)?
     Are there circumstances in which application of the Form 
8-K instruction regarding previously reported information would 
undercut the purpose of Item 10, which is to make the reportable 
information readily available to the public? Would the relatively short 
reporting deadlines applicable to Item 10 reports make it less likely 
for Item 10 information to be previously reported?

B. Application to Transactions

    The transactions subject to reporting under paragraph (a) of Item 
10 would include transactions in any class of company equity security 
(whether or not registered under Section 12), including derivative 
securities with respect to company equity securities (whether or not 
the derivative securities were issued by the company). The company 
would report any transaction in which the director or executive officer 
has a pecuniary interest, \46\ including transactions with third 
parties as well as transactions with the company. As proposed, the 
company would not need to report trust transactions that would not be 
reportable by the director or executive officer under Section 16(a). 
\47\
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    \46\ Instruction 2 to proposed Item 10 applies the Exchange Act 
Rule 16a-1(a)(2)(i) [17 CFR 240.16a-1(a)(2)(i)] definition of 
``pecuniary interest,'' which is ``the opportunity, directly or 
indirectly, to profit or share in any profit derived from a 
transaction in the subject securities.
    \47\ Instruction 2 to proposed Item 10 refers to Exchange Act 
Rule 16a-8(b) [17 CFR 240.16a-8(b)], which specifies the 
circumstances where transactions in company securities held by a 
trust are reportable by an officer, director or more than ten 
percent beneficial owner who is the trustee, beneficiary, settlor or 
remainderman of the trust.

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[[Page 19919]]

    Question regarding trust transactions:
     Should a company be required to report Section 16(a) 
exempt trust transactions unless the director or executive officer is 
unaware of the transactions because they are made through a blind 
trust?
1. Reportable and Exempt Transactions
    A company would be required to report any transaction by a director 
or executive officer that is the economic equivalent of a sale. For 
example, we would expect the company to report as a sale a director or 
executive officer's pledge of company equity securities pursuant to a 
loan from a third party where the loan is non-recourse or there is 
otherwise an expectation on the part of the director or executive 
officer that the loan will be repaid by foreclosure or other recourse 
to the securities, even if there is no formal arrangement.
    Reportable transactions would be substantially similar, but not 
identical, to those that the director or executive officer is required 
to report under Section 16(a).\48\ For example, gifts would be 
reportable transactions. However, as proposed, transactions in the 
following categories would not be reportable under Item 10 because they 
do not generally appear to reflect management's views of the company's 
prospects or sever the link between executive compensation and company 
equity securities performance:
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    \48\ The company's Form 8-K report of a transaction would not 
relieve an officer or director from the obligation to report that 
transaction under Section 16(a) on Form 4 or Form 5, or to file a 
notice of proposed sale on Form 144, as applicable. As discussed 
below, the information regarding the transaction reportable on Form 
8-K would not be identical to the information reported on Form 4 or 
Form 5.
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     Receipt of stock dividends (including stock splits) and 
pro rata rights;\49\
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    \49\ These are the transactions exempted from Section 16(a) 
reporting by Exchange Act Rule 16a-9 [17 CFR 240.16a-9]. These 
transactions, along with other transactions described below as 
exempted by rule from Section 16(a), also are exempted from Section 
16(b) short-swing profit recovery by Exchange Act Rule 16a-10 [17 
CFR 240.16a-10].
---------------------------------------------------------------------------

     Acquisitions pursuant to regular reinvestment of dividends 
or interest through a broad-based reinvestment plan;\50\
---------------------------------------------------------------------------

    \50\ These are the transactions exempted from Section 16(a) 
reporting by Exchange Act Rule 16a-11 [17 CFR 240.16a-11].
---------------------------------------------------------------------------

     Acquisitions or dispositions pursuant to domestic 
relations orders;\51\
---------------------------------------------------------------------------

    \51\ These are the transactions exempted from Section 16(a) 
reporting by Exchange Act Rule 16a-12 [17 CFR 240.16a-12].
---------------------------------------------------------------------------

     Transactions as executor of an estate or similar fiduciary 
during the 12 months following appointment;\52\
---------------------------------------------------------------------------

    \52\ These are the transactions exempted from Section 16(a) 
reporting by Exchange Act Rule 16a-2(d) [17 CFR 240.16a-2(d)].
---------------------------------------------------------------------------

     Transactions that change the form of beneficial ownership 
without changing the director's or executive officer's pecuniary 
interest in the equity securities;\53\
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    \53\ These are the transactions exempted from Section 16(a) 
reporting by Exchange Act Rule 16a-13 [17 CFR 240.16a-13].
---------------------------------------------------------------------------

     Routine acquisitions (e.g., through payroll deduction) 
pursuant to broad-based, tax-conditioned employee benefit plans and 
related excess benefit plans;\54\
---------------------------------------------------------------------------

    \54\ These are the transactions exempted from Section 16(b) 
short-swing profit recovery by Exchange Act Rule 16b-3(c) [17 CFR 
240.16b-3(c)]. Exchange Act Rule 16a-3(f)(1)(i)(B) [17 CFR 240.16a-
3(f)(1)(i)(B)] exempts these transactions from Section 16(a) 
reporting. However, Instruction 3 to proposed Item 10 would require 
reporting of volitional intra-plan transfers involving an issuer 
equity securities fund, or a cash distribution funded by a 
volitional disposition of an issuer equity security, unless the 
transaction is made in connection with the director's or executive 
officer's death, disability, retirement or termination of 
employment, or is required to be made available to plan participants 
pursuant to the Internal Revenue Code. These transactions, which are 
``discretionary transactions,'' as defined in Exchange Act Rule 16b-
3(b)(1) [17 CFR 240.16b-3(b)(1)], may reflect a director's or 
executive officer's views as to the company's prospects.
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     Transfers by will or the laws of descent and 
distribution;\55\
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    \55\ These transactions are some of the transactions exempted 
from Section 16(b) short-swing profit recovery by Exchange Act Rule 
16b-5 [17 CFR 240.16b-5].
---------------------------------------------------------------------------

     Acquisitions or dispositions pursuant to holding company 
formations and similar corporate reclassifications and 
consolidations;\56\ and
     Deposits or withdrawals of equity securities from voting 
trusts.\57\
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    \56\ These are the transactions exempted from Section 16(b) 
short-swing profit recovery by Exchange Act Rule 16b-7 [17 CFR 
240.16b-7].
    \57\ These are the transactions exempted from Section 16(b) 
short-swing profit recovery by Exchange Act Rule 16b-8 [17 CFR 
240.16b-8].
---------------------------------------------------------------------------

    Questions regarding proposed exempt transactions:
     Should transactions in any of the proposed exempt 
categories be subject to Item 10 current reporting?

--Have we chosen the proper criteria for selecting exempt categories of 
transactions?
--For example, because deposit or withdrawal of securities from a 
voting trust may affect voting control, should the company make current 
disclosure of these transactions?

     Are there any other categories of transactions that should 
be excluded from Item 10 current reporting?

--Does a director's or executive officer's decision to dispose of 
equity securities by gift reflect a view as to the company's prospects?
--Should gifts be exempted where the director or executive officer is 
the donee rather than the donor?
2. Content and Format of Reports
    With respect to an acquisition or disposition of company equity 
securities, the company would be required to report:
     The name and title of the director or executive officer;
     The date of the transaction;
     The title and number of securities acquired or disposed 
of;
     The per share acquisition or disposition price, if any;
     The aggregate value of the transaction;
     The nature of the transaction (e.g., open market sale or 
purchase, sale to or purchase from the registrant, gift); and
     Any other material information regarding the transaction.
    As proposed, the information would be reported in any narrative or 
tabular format that provides a clear, accurate description of the 
transaction.\58\ Given the rapid due date(s) that would apply, we do 
not propose to require the company to reconcile and report a director's 
or executive officer's holdings following a transaction. On a voluntary 
basis, the company could include additional information concerning the 
transaction.
---------------------------------------------------------------------------

    \58\ In Section V, below, we have provided sample disclosure, 
which illustrates a tabular format for paragraph (a) transactions.
---------------------------------------------------------------------------

    Questions regarding content and format:
     Should a specified tabular format be required to 
facilitate comparisons and reference by investors?
     Is it necessary to include holdings information to make 
the proposed reports useful to investors?

--If so, would its inclusion substantially increase the cost of 
compliance?

     Would any particular additional information be necessary 
to make the proposed reports useful to investors?

--For example, should events be coded by type for ease of 
identification?

 If so, should the same codes used for purposes of Section 
16(a) reporting be used where applicable?

--If the transaction is pursuant to a Rule 10b5-1 arrangement, should 
this be noted?

 If so, should the Rule 10b5-1 arrangement be identified?

[[Page 19920]]

 Would identifying transactions in this manner enhance the 
proposed Form 8-K disclosure of Rule 10b5-1 plans?
 Would this identification enable investors to better analyze 
the possible ``market signal'' value of the reported transactions?
    Questions regarding relationship to Section 16(a) reports:
     Assuming proposed Item 10 is adopted, would it be feasible 
and desirable to permit officers and directors to satisfy their Section 
16(a) reporting obligations by attaching a Form 4 to the company's Item 
10 Form 8-K reporting the same transaction?

--Should we adopt a pilot program in which companies could voluntarily 
enroll to use this procedure?

     Conversely, should the company be able to satisfy its Item 
10 Form 8-K reporting obligation by adding Form 8-K header information 
to an officer's or director's Form 4?
     Should Form 4 include disclosure of when the transaction 
was reported on Form 8-K?
     Transactions between officers or directors and the company 
that are exempted from Section 16(b) short-swing profit recovery 
currently may be reported within 45 days after the company's fiscal 
year end on Form 5.\59\ Should we instead require officers and 
directors to report some or all of these transactions earlier on Form 
4? Are there any other transactions currently reportable on Form 5 that 
should instead be reported on Form 4?
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    \59\ Rules 16b-3(d) and 16b-3(e) exempt grants, awards and other 
acquisitions from the issuer, and dispositions to the issuer, 
respectively. Rule 16a-3(f)(1)(i) allows these and most other 
transactions exempt from Section 16(b) to be reported on Form 5.
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3. Derivative Securities
    For purposes of Item 10, ``derivative securities'' would be defined 
the same as in Rule 16a-1(c), but without regard to the exclusion for 
rights with an exercise or conversion privilege at a price that is not 
fixed.\60\ Although Exchange Act Rule 16a-1(c)(6) \61\ excludes these 
instruments from the application of Section 16 because the opportunity 
to profit from them is not fixed, as described above the purposes of 
proposed Item 10 disclosure are different and do not involve profit 
recapture. As proposed, transactions in instruments such as preferred 
stock convertible into common stock at a floating exercise price \62\ 
and performance-based units\63\ would be reportable under Item 10. 
Reportable derivative securities also would include security-based swap 
agreements \64\ and, when authorized for trading, security futures 
products.\65\
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    \60\ Proposed Instruction 1 to Item 10.
    \61\ ``Derivative securities'' are defined in Exchange Act Rule 
16a-1(c) [17 CFR 240.16a-1(c)] as ``any option, warrant, convertible 
security, stock appreciation right, or similar right with an 
exercise or conversion privilege at a price related to an equity 
security, or similar securities with a value derived from the value 
of an equity security,'' with certain exceptions. Subparagraph (6) 
of this rule excludes from that definition ``rights with an exercise 
or conversion privilege at a price that is not fixed.''
    \62\ See Morgan Capital, L.L.C. v. Medtox Scientific, Inc., 258 
F.3d 763 (8th Cir. 2001), cert. denied, 122 S.Ct. 1065, 151 L.Ed. 2d 
969, 70 U.S.L.W. 3374 (Feb. 19, 2002) (No. 01-739).
    \63\ These instruments are not considered ``derivative 
securities'' under Exchange Act Rule 16a-1(c) because their 
exercisability is subject to conditions (other than the passage of 
time and continued employment) that are not tied to the market price 
of a company equity security. Staff interpretive letter to Certilman 
Balin Adler & Hyman (Apr. 20, 1992).
    \64\ This term, which is used in Sections 16(a) and (b), is 
defined in Section 206B of the Gramm-Leach-Bliley Act.
    \65\ Section 16(f) applies the provisions of Section 16 to 
ownership of and transactions in these products. Section 3(a)(56) of 
the Exchange Act [15 U.S.C. 78c(a)(56)] defines ``security futures 
product'' as ``a security future or any put, call, straddle, option, 
or privilege on any security future.'' Section 3(a)(55)(A) of the 
Exchange Act [15 U.S.C. 78c(a)(55)(A)] defines a ``security future'' 
generally as a contract of sale for future delivery of a single 
security or of a narrow-based security index.
---------------------------------------------------------------------------

    In addition to the information described above for other equity 
securities transactions, reports of acquisitions or dispositions of 
derivative securities would include:
     The per share exercise or conversion price (or other 
price, such as a notional price, used in the terms of the derivative 
security);
     The date(s) on which each derivative security becomes 
exercisable (or subject to termination), and its date of expiration (or 
final termination);
     The title and number of underlying securities (or cash 
equivalent) that would be acquired or disposed of upon exercise, 
conversion, termination or settlement;
     The nature of the transaction (e.g., option grant, sale or 
purchase of call option, sale or purchase of put option, entering into 
a swap or futures contract), indicating whether the transaction 
involves a collar or other hedge, and if so describing all material 
terms;\66\ and
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    \66\ In Exchange Act Release No. 34514 (Aug. 10, 1994) [59 FR 
42449], the Commission described the derivative securities analysis 
for reporting equity swaps and instruments with similar 
characteristics under Section 16(a). In Exchange Act Release No. 
37260 (May 31, 1996) [61 FR 30376], the Commission further addressed 
this analysis and adopted Code K for reporting these transactions.
---------------------------------------------------------------------------

     Any other material information regarding the transaction, 
including contingencies applicable to exercise.

For purposes of Item 10, entering into a contract that involves a 
derivative security would be reportable as an acquisition or 
disposition of a derivative security, in the same manner as under 
Section 16(a). As proposed, Item 10 would require disclosure of option 
grants pursuant to employee benefit plans sponsored by the company, the 
surrender of those options, and the issuance of replacement grants. The 
disclosure also is intended to capture option repricings.
    Reports of exercises, conversions, terminations or settlements of 
derivative securities would include:
     The date of the exercise, conversion, termination or 
settlement;
     The per share price used for exercise, conversion, 
termination or settlement;
     The title and number of underlying securities (or cash 
equivalent) acquired or disposed of;
     The nature of the transaction (e.g., exercise of option, 
settlement of swap agreement), indicating whether the transaction 
involves a collar or other hedge, and if so describing all material 
terms; and
     Any other material information regarding the transaction.

As proposed, Item 10 would require disclosure of the expiration of a 
derivative security.
    Questions regarding derivative securities reporting:
     Is the proposed definition of ``derivative security'' 
appropriate for Item 10 purposes?

--If not, what different definition should be used?

     Should instruments such as preferred stock convertible 
into common stock at a floating exercise price and performance-based 
units be reportable under Item 10, as proposed?
     Should any other transactions that do not involve 
derivative securities reportable under Section 16(a), such as tax 
withholding rights or stock-for-stock exercise withholding rights,\67\ 
also be reportable under Item 10?
---------------------------------------------------------------------------

    \67\ Exchange Act Rule 16a-1(c)(3) [17 CFR 240.16a-1(c)(3)] 
excludes these rights from ``derivative securities.''
---------------------------------------------------------------------------

     Is information concerning employee benefit plan option 
grants of sufficient value to investors to warrant Item 10 disclosure?
     Would the proposed categories of information about 
derivative securities transactions satisfy investors' needs?

--What, if any, additional information should be required?

 For example, should Item 10 require reporting of other 
material

[[Page 19921]]

modifications to derivative securities?

--Alternatively, are any of the proposed categories not necessary?

 For example, is information concerning expirations of 
derivative securities of sufficient value to investors to warrant Item 
10 disclosure? Does the answer differ depending upon the type of 
derivative security?

C. Application To Exchange Act Rule 10b5-1 Arrangements

    Under paragraph (b) of Item 10, a company would be required to 
report that a director or executive officer has entered into a 
contract, instruction or written plan for the purchase or sale of 
company equity securities intended to satisfy the affirmative defense 
conditions of Exchange Act Rule 10b5-1(c). This disclosure, like 
paragraph (a) disclosure, would apply based on the director's or 
executive officers' pecuniary interest in the securities subject to the 
contract, instruction or written plan.\68\
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    \68\ For example, a Rule 10b5-1 plan for the sale of securities 
held by a member of an executive officer's immediate family, as 
defined in Exchange Act Rule 16a-1(e) [17 CFR 240.16a-1(e)], sharing 
the same household as the executive officer would be reportable. 
However, Instruction 3 to proposed Item 10 would not require 
disclosure of a director's or executive officer's enrollment in a 
broad-based employee benefit plan for the acquisition of registrant 
equity securities through payroll deduction.
---------------------------------------------------------------------------

    The conditions of Rule 10b5-1(c) do not require the person who 
purchases or sells to make a specific filing in order to establish 
availability of the affirmative defense. Proposed Item 10 would not 
change this; the availability of the Rule 10b5-1(c) defense would not 
be conditioned on a company's reporting the contract, instruction or 
written plan on a Form 8-K. The purpose of the Form 8-K would be to 
disclose potential transactions under the arrangement, rather than to 
establish the defense.
    If a transaction is executed at the time the director or executive 
officer provides a Rule 10b5-1(c) instruction, such as a broker-
dealer's immediate execution of a limit order, the company would report 
the transaction under paragraph (a), noting the director's or executive 
officer's use of an instruction intended to satisfy the rule's 
affirmative defense conditions, and would not need to report the 
instruction separately under paragraph (b). In other circumstances, the 
company's report under paragraph (b) of the contract, instruction or 
written plan would not relieve the company from subsequent obligations 
to report transactions thereunder pursuant to Item 10 paragraph 
(a).\69\
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    \69\ The director's or executive officer's obligations to report 
these subsequent transactions under Section 16(a) and to file a Form 
144, where applicable, would not be affected.
---------------------------------------------------------------------------

    When the director or executive officer enters into the contract, 
instruction or written plan, the company would report:
     The name and title of the director or executive officer;
     The date on which the director or executive officer 
entered into the contract, instruction or written plan; and
     A description of the contract, instruction or written 
plan, including its duration, the aggregate number of securities to be 
purchased or sold, and the name of the counterparty or agent.

A company would be able to use the form to disclose voluntarily 
additional information about the Rule 10b5-1 arrangement.
    When the director or executive officer later terminates or modifies 
a contract, instruction or written plan, the company would report:
     The date of the termination or modification; and
     A description of the modification, including any 
modification to the duration, the aggregate number of securities to be 
purchased or sold, the interval at which securities are to be purchased 
or sold, the number of securities to be purchased or sold in each 
interval, the price at which securities are to be purchased or sold, 
and the identity of the counterparty or agent.
    A director's or executive officer's termination or modification of 
a Rule 10b5-1 arrangement may indicate a change regarding the company's 
prospects, and thus may be valuable information to investors. Although 
we have not proposed to require reports that a director or executive 
officer has entered into a Rule 10b5-1 arrangement to disclose the 
prices and intervals at which transactions would occur, or the number 
of securities to be purchased or sold per interval, we believe that 
modifications to these terms should be reportable. We would require 
such modifications to be reported in general terms, such as an increase 
in the applicable limit order price, or a decrease in the number of 
shares to be sold periodically under the arrangement, without requiring 
disclosure of the specific price, number of securities, or duration of 
interval.
    Questions regarding disclosure of Rule 10b5-1 arrangements:
     Is disclosure of any additional information about these 
arrangements necessary for these proposed reports to be useful to 
investors?
     Would disclosure of any particular terms invite market 
manipulation?
     Is there a general expectation of privacy with respect to 
the terms of Rule 10b5-1 arrangements?

--Is there a specific expectation of privacy with respect to the 
identity of the counterparty or agent?
--Is disclosure of that identity useful where the Rule 10b5-1 plan 
involves the use of more than one counterparty or agent?

D. Application to Company Loans

    Under paragraph (c) of Item 10, a company would be required to 
report any loan of money to, or lending arrangement with, a director or 
executive officer by the company or an affiliate of the company. The 
company also would need to report if it, or its affiliate, entered into 
a guarantee or similar arrangement in favor of a third party making 
such a loan to, or lending arrangement with, a director or executive 
officer.
    These financial arrangements involve the use of company assets for 
arrangements that are not available to shareholders generally. Further, 
forgiveness of a loan (or the company's payment on its guarantee) 
effectively results in the company's payment to the director or 
executive officer of additional compensation.
    When the company makes such a loan, or enters into a lending 
arrangement or a guarantee or similar arrangement, the company would be 
required to report:
     The name and title of the director or executive officer;
     The date of each such agreement (or guarantee or similar 
arrangement) or loan thereunder;
     The dollar amount and other material terms of the 
agreement or loan, and, if applicable, guarantee or similar 
arrangement, including interest rate, terms of repayment, and any 
provisions with respect to forgiveness;
     The number and class of any securities pledged as 
collateral; and
     The material terms of any pledge, including whether it is 
made with or without recourse.
    When forgiveness, foreclosure or the company's payment on its 
guarantee occurs, the company would be required to report:
     The name and title of the director or executive officer; 
and
     The date on which the forgiveness, payment or foreclosure 
occurred, and the dollar amount of forgiveness or

[[Page 19922]]

payment and the number and class of any securities foreclosed upon.
    Questions regarding disclosure of company loans and guarantees:
     Should this disclosure be required only if the company's 
equity securities are pledged or pledged without recourse?
     Should loans of less than $100,000 be excluded from Item 
10?
     Should disclosure also apply with respect to any loan to 
members of the immediate family of a director or executive officer, to 
any corporation or organization in which a director or executive owner 
beneficially owns ten percent or more of any class of equity security, 
or to any trust or other estate in which the director or executive 
officer has a substantial beneficial interest or serves as trustee or 
in a similar capacity? \70\
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    \70\ Item 404(c) of Regulation S-K, which requires disclosure of 
any director's or executive officer's indebtedness to the company or 
its subsidiaries at any time since the beginning of the company's 
last fiscal year in an amount in excess of $60,000, also requires 
disclosure of these loans.
---------------------------------------------------------------------------

     Is the scope of Item 10 as proposed, including loans (and 
guarantees or similar arrangements) by the company and its affiliates, 
too broad? If so, in what manner?
     If Item 10 is adopted as proposed, requiring rapid 
disclosure of these loans and guarantees, should the Commission 
consider rescinding any portion of other disclosure requirements 
regarding management indebtedness?

E. Anticipated Transition

    Assuming proposed Item 10 is adopted, we will need to provide for a 
transition. We expect that the proposal would become effective 60 days 
following Federal Register publication of the final rule, and that 
transactions occurring on and after that date would be reportable under 
paragraph (a).
    However, because companies may need to establish procedures to 
capture and report information about derivative securities transactions 
on an accelerated basis, we would expect to delay for an additional 60 
days compliance with the obligation to report these transactions within 
two business days if the transaction's aggregate value is $100,000 or 
more. For the first 60 days after the effective date, derivative 
securities transactions would be reportable not later than the close of 
business on the second business day of the week following the week in 
which the transaction occurred, without regard to aggregate value.
    Rule 10b5-1 arrangements and loans entered into before the 
effective date remaining in effect on the effective date would be of 
equal significance to investors as those entered into later. 
Accordingly, we would expect to require companies to report them under 
paragraphs (b) and (c), respectively, on (or within a short period 
after) the effective date.
    Questions regarding transition:
     Would the phased-in transition schedule described above 
for derivative securities transactions be appropriate for these 
transactions or any other category of transaction?
     Were pre-existing Rule 10b5-1 arrangements entered into 
with privacy expectations that would warrant transition treatment 
different from that proposed above?

--If so, how should these arrangements be treated for transition 
purposes?

IV. General Request for Comment

    We invite any interested person wishing to submit written comments 
on this proposed amendment to Form 8-K, the related amendments to 
Securities Act Rule 144 and Securities Act Forms S-2, S-3 and S-8, and 
any other matters that might have an impact on the proposed amendments, 
to do so. We specifically request comments from investors, companies 
that would be required to file Item 10 information, directors and 
executive officers, broker-dealers, portfolio managers, and other 
fiduciaries.
    As described in greater detail in Section III above, we request 
comment regarding:
     What persons' Item 10 events should be reportable;
     What companies should be required to report;
     Implementation costs to companies;
     Appropriateness of reporting deadlines and dollar 
thresholds;
     Proposed Commission finding regarding company liability 
for violations;
     Filed status of reports and effect on Rule 144 and short-
form Securities Act registration;
     Reportable and exempt transactions;
     Content and format of reports;
     Proposed Item 10's relationship to Section 16(a) reports;
     Accelerated Section 16(a) reporting of officers' and 
directors' transactions with the company;
     Derivative securities disclosure;
     Disclosure of Rule 10b5-1 arrangements; and
     Disclosure of company loans and guarantees.
    In addition, we request your comment on the following subjects:
    Questions regarding benefit and practicability:
     Will the proposal provide meaningful, timely information 
to investors?
     As drafted, is the proposed amendment easy to understand 
and practical to implement?
    Questions regarding website access:
     Should the Commission encourage companies to post on their 
web sites the information reportable on an Item 10 Form 8-K? \71\
---------------------------------------------------------------------------

    \71\ Today we also issue a companion release, Securities 
Exchange Act Release No. 45741 (Apr. 12, 2002), that includes, among 
other things, a proposal regarding website access to Forms 10-K, 10-
Q and 8-K filed by certain companies. This proposal would address 
web site access to Item 10 Forms 8-K filed by some, but not all, 
companies subject to Item 10 disclosure.

--If so, in what manner?
    We will consider all comments responsive to this inquiry in 
complying with our responsibilities under Section 23(a) of the Exchange 
Act.\72\
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78w(a).
---------------------------------------------------------------------------

V. Sample Item 10 Disclosure

    As an aid to explaining this proposal, we have prepared the 
following sample disclosure:

Item 10. Transactions by Directors and Executive Officers

(a)(1) Acquisitions/Dispositions of Equity Securities

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Per share
  Name and title of director/executive         Date of          Title and number of        acquisition/     Aggregate value    Description of nature of
                 officer                     transaction       securities involved in       disposition     of transaction           transaction
                                                                    transaction                price
--------------------------------------------------------------------------------------------------------------------------------------------------------
John Jones/CEO..........................           2/19/02  25,000 shares common stock.            $14.10          $352,500  Sold shares in open market
                                                                                                                              transaction.
Jane Smith/Director.....................           2/20/02  4,000 shares Series A                   30.00           120,000  Purchased shares in open
                                                             preferred stock.                                                 market transaction.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 19923]]

(a)(2) Acquisitions/Dispositions of Derivative Securities

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Number of
                                                   derivative       Per share    Price (if any)   Exercisability/    Title and number    Description of
  Name and title of director/        Date of       securities       exercise/     of derivative   expiration dates    of underlying        nature of
       executive officer           transaction     involved in     conversion       security       of derivative        securities        transaction
                                                   transaction        price                           security
--------------------------------------------------------------------------------------------------------------------------------------------------------
Norman Young/CAO...............         2/19/02           (\1\)           14.00           (\1\)  Exercisable        10,000 shares of   Agreement to sell
                                                                                                  commencing 2/19/   common stock.      securities--hedg
                                                                                                  02; expiring 2/                       ing
                                                                                                  19/03.                                transactions.(\1
                                                                                                                                        \)
Theresa White/Vice President...         2/20/02           2,500           14.25               0  (\2\)............  2,500 shares of    Received employee
                                                                                                                     common stock.      stock option
                                                                                                                                        grant.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ On February 19, 2002, Norman Young, the Chief Accounting Officer of the registrant, entered into a ``swap'' agreement with XYZ Brokerage Firm
  (``XYZ'') pursuant to which, on February 19, 2003, XYZ will be required to pay to Mr. Young an amount equal to the current market value of 10,000
  shares of registrant's common stock, or $140,000, and Mr. Young will be required to pay XYZ an amount equal to the then-current market value of 10,000
  shares of the registrant's common stock. In addition, Mr. Young has agreed to pay XYZ, as a fee, an amount equal to \1/4\ of one percent of the
  current market value of the 10,000 shares of registrant's common stock subject to the agreement and that, to the extent that the registrant declares
  and pays any dividend on its common stock during the term of the agreement, any such amounts will be paid to XYZ. XYZ has agreed to pay to Mr. Young
  an amount equal to the ``prime'' interest rate on $140,000 during the term of the agreement.
\2\ Employee stock option is exercisable in four equal annual installments, beginning on the first anniversary of the date of grant. The option will
  expire on February 19, 2012.

(a)(3) Exercises/Conversions of Derivative Securities

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Number of
                                                               derivative         Per share
  Name and title of director/executive         Date of         securities         exercise/         Title and number of        Description of nature of
                 officer                     transaction       involved in    conversion price     underlying securities             transaction
                                                               transaction
--------------------------------------------------------------------------------------------------------------------------------------------------------
John Jones/CEO..........................           2/19/02             5,000             $4.50  5,000 shares of common       Exercised employee stock
                                                                                                 stock.                       option.
--------------------------------------------------------------------------------------------------------------------------------------------------------

(b)(1) Rule 10b5-1 Plans

    On February 20, 2002, Tom Johnson, the Chief Financial Officer 
of the registrant, entered into a plan with ABC Brokerage Firm, 
pursuant to which ABC will undertake to sell 25,000 shares of the 
common stock of the registrant currently owned by Johnson at 
specified intervals through the end of 2002.
    On February 22, 2002, Donald Cummings, the registrant's Vice-
President for sales, modified a previously reported sales plan with 
XYZ Brokerage Firm to decrease the number of shares of registrant 
common stock subject to sale on a monthly basis pursuant to the 
plan, and to decrease the limit order price at which the shares may 
be sold under the plan. These modifications will reduce to 18,000 
the aggregate number of shares that may be sold by Mr. Cummings 
pursuant to the plan.
    On February 22, 2002, Patricia Brown, the registrant's vice-
president for administration, terminated her previously reported 
sales plan with LMN Brokerage Firm.

(c) Loans

    On February 19, 2002, the registrant agreed to loan Sandra 
Green, a member of the registrant's board of directors, $50,000 for 
the purpose of purchasing 10,000 shares of the registrant's common 
stock through the exercise of a stock option previously granted to 
Ms. Green on May 1, 1999. The loan, which is immediately available, 
will bear interest at the rate of four percent per annum and will be 
evidenced by a written promissory note containing the following 
terms. Interest will accrue during the term of the loan, which is 
five years. Principal and accrued interest will be due and payable 
at the expiration of the loan term. The loan will be non-recourse. 
Under the provisions of the note, the registrant's board of 
directors has the discretion to forgive any repayment of principal 
and interest if the board deems such action to be in the best 
interests of the registrant. The 10,000 shares of the registrant's 
common stock to be acquired with the loan proceeds will secure 
repayment of the loan. These shares will be held in escrow for the 
benefit of the registrant pending repayment or substitution of 
additional or different collateral in form and amount satisfactory 
to the registrant.

VI. Paperwork Reduction Act

    The proposed amendment to Form 8-K contains ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 \73\ (``PRA''). We are submitting the proposed 
amendment to the Office of Management and Budget (``OMB'') for review 
in accordance with the PRA.\74\ The title for the collection of 
information is ``Form 8-K.'' An agency may not conduct or sponsor, and 
a person is not required to respond to, an information collection 
unless it displays a currently valid OMB control number.
---------------------------------------------------------------------------

    \73\ 44 U.S.C. 3501 et seq.
    \74\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    Form 8-K (OMB Control No. 3235-0060) was adopted pursuant to 
Sections 13(a), 15(d), and 23 of the Exchange Act and prescribes 
information, such as material events or corporate changes that a 
company must disclose. Preparing and filing a current report on Form 8-
K is a collection of information.

A. Summary of Proposed Amendment

    The proposed amendment would add a new item, Item 10, to Form 8-K. 
Item 10 would require companies with a class of equity securities 
registered under Section 12 of the Exchange Act to disclose certain 
information about directors' and executive officers' transactions in 
company equity securities (including derivative securities transactions 
and transactions with the company), directors' and executive officers' 
arrangements for the purchase or sale of company equity securities 
intended to satisfy the affirmative defense conditions of Exchange Act 
Rule 10b5-1, and loans of money to directors and executive officers 
made or guaranteed by the company or its affiliates.
    Generally, current reports of transactions and loans would be due 
within two business days if the event has an aggregate value of 
$100,000 or more. Reports of transactions and loans with a smaller 
aggregate value, grants and awards pursuant to employee benefit plans, 
and Rule 10b5-1 arrangements would be due by the close of business on 
the second business day of the week following the week in which the 
event occurred.
    We are proposing this amendment to alert investors to shifts in the 
alignment

[[Page 19924]]

between management's and shareholders' economic interests. The proposed 
amendment, particularly with respect to derivative securities used for 
hedging purposes, also would disclose transactions by directors and 
executive officers that in effect sever the link between executive 
compensation and company equity securities performance. Finally, we 
believe that the proposed amendment would provide investors with timely 
disclosure of potentially useful information as to management's views 
of the performance and prospects of the company, thereby enabling 
investors to make better informed investment decisions. The collection 
of information will be mandatory for all companies with a class of 
equity securities registered under Section 12 of the Exchange Act. 
There will be no mandatory retention period for the information 
collected. The collection of information will not be kept confidential.

B. Reporting and Cost Burden Estimates

    The reporting and cost burden estimates for the proposed collection 
of information are based on the following assumptions. The likely 
respondents that will be subject to the proposed collection of 
information include entities with a class of equity securities 
registered under Section 12 of the Exchange Act. We estimate that there 
are approximately 10,100 entities that fit this description.\75\ We 
estimate that, as a result of the proposed amendment, each respondent 
will make approximately 21 disclosures per year.\76\
---------------------------------------------------------------------------

    \75\ This estimate is based on the total number of companies 
that filed proxy (9,892) or information (253) statements during the 
2000 fiscal year, which are required of all issuers registered under 
Section 12 of the Exchange Act.
    \76\ This estimate is based on (a) a review of the number of 
reports filed by officers and directors under Section 16(a) of the 
Exchange Act during the period February--December 2000 (projected 
over a 12-month period), (b) consultations with several law firms 
who advise registrants on compliance with Exchange Act Rule 10b5-1, 
and (c) a review of related-party transactions disclosed in proxy 
and information statements filed during the 2001 fiscal year. This 
review leads to the following estimates. First, approximately 
200,000 transactions in company equity securities by executive 
officers and directors would be subject to disclosure under Item 10 
of Form 8-K. (This estimate is based upon assumptions that (i) the 
69,900 transactions in excess of $100,000 would each require a 
separate Form 8-K, (ii) the 62,550 transactions with a value less 
than $10,000 would be reported on a deferred basis, with 20% of 
these transactions included on Forms 8-K filed to disclose other 
transactions and the remaining 80% reported in groups of three, and 
(iii) the remaining 186,000 transactions would generate 113,250 
Forms 8-K after taking into account that generally option grants are 
made on the same date, option exercise and sale activity tends to 
occur during corporate trading periods, and option exercises and 
sales by individual officers and directors tend to occur on 
successive days (all of which would be multiple transactions to be 
disclosed on a single Form 8-K).) Second, approximately 7,600 
transactions by executive officers and directors involving Exchange 
Act Rule 10b5-1 arrangements would be subject to disclosure under 
Item 10 of Form 8-K. (This estimate is based upon a sampling of 
press releases for 23 registrants, of whom approximately 50% 
disclosed Exchange Act Rule 10b5-1 arrangements covering 39 officers 
and directors. These figures were then projected on the total number 
of companies with a class of securities registered under Section 12 
of the Exchange Act--10,100--to produce 5,050 companies with an 
average of three disclosures each year. The resulting total was 
reduced by 50% to reflect that many of these disclosures would be 
reported on the same Form 8-K.) Finally, approximately 7,900 company 
loans to executive officers and directors would be subject to 
disclosure under Item 10 of Form 8-K. (This estimate is based upon a 
sampling of 50 proxy statements, of which 26% reflected corporate 
loans covering 39 separate transactions with executive officers and 
directors. These figures were then projected on the total number of 
companies with a class of securities registered under Section 12 of 
the Exchange Act --10,100--to produce 2,626 companies with an 
average of three loans each.) Distributed across the number of 
companies with a class of equity securities registered under Section 
12 of the Exchange Act, this results in an average of 21 disclosures 
per company (215,500/10,100).
---------------------------------------------------------------------------

    Based on a burden hour estimate of three hours,\77\ we estimate 
that each respondent will incur 63 burden hours \78\ to prepare and 
file the required disclosures and that, in the aggregate, all 
respondents will incur 636,300 burden hours \79\ to prepare and file 
the required disclosures.
---------------------------------------------------------------------------

    \77\ This estimate is based on consultations with several law 
firms and other persons who regularly complete Forms 8-K and/or 
Forms 4 and 5.
    \78\ (21 disclosures  x  three hours).
    \79\ (10,100 companies  x  63 hours).
---------------------------------------------------------------------------

    We anticipate that respondents will retain outside counsel to 
assist in the preparation and filing of the required disclosures.\80\ 
Of the total burden resulting from the proposed amendments, seventy-
five percent is reflected as burden hours and the remainder is 
reflected in the total cost of complying with the information 
collection requirements. We estimate that the total dollar cost of 
complying with Item 10 Form 8-K, including outside counsel costs, will 
be $70,756,500, an increase of $47,722,500 from the current annual 
burden of $23,034,000 for Form 8-K.
---------------------------------------------------------------------------

    \80\ We have used an estimated hourly rate of $300.00 to 
determine the estimated cost to respondents of the disclosure 
prepared by outside counsel. We arrived at this hourly rate estimate 
after consulting with several private law firms. (10,100  x  63 
hours  x  25%  x  $300.00 = $47,722,500).
---------------------------------------------------------------------------

C. Request for Comment

    We request comment in order to (a) evaluate whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information will 
have practical utility, (b) evaluate the accuracy of our estimate of 
the burden of the proposed collection of information, (c) determine 
whether there are ways to enhance the quality, utility and clarity of 
the information to be collected, and (d) evaluate whether there are 
ways to minimize the burden of the collection of information on those 
who respond, including through the use of automated collection 
techniques or other forms of information technology.\81\
---------------------------------------------------------------------------

    \81\ Comments are requested pursuant to 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

    Any member of the public may direct to us any comments concerning 
the accuracy of these burden estimates and any suggestions for reducing 
the burdens. Commenters may wish to consider whether the proposed 
collection of information with respect to directors' and executive 
officers' transactions could reduce collection of information burdens 
with respect to reporting those transactions under Section 16(a) of the 
Exchange Act. Persons who desire to submit comments on the collection 
of information requirements should direct their comments to the OMB, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and 
send a copy of the comments to Jonathan G. Katz, Secretary, Securities 
and Exchange Commission, 450 Fifth Street NW, Washington, DC 20549-
0609, with reference to File No. S7-09-02. Requests for materials 
submitted to the OMB by us with regard to this collection of 
information should be in writing, refer to File No. S7-09-02 and be 
submitted to the Securities and Exchange Commission, Records 
Management, Office of Filings and Information Services, 450 Fifth 
Street NW, Washington, DC 20549. Because the OMB is required to make a 
decision concerning the collections of information between 30 and 60 
days after publication, your comments are best assured of having their 
full effect if the OMB receives them within 30 days of publication.

VII. Costs and Benefits

A. Background

    The current system of federal securities regulation is based on 
full disclosure; an approach that provides a cost-effective means for 
markets to allocate capital. In order to function effectively, however, 
there must be full, clear and timely disclosure to support the market's 
allocation decisions. Investors should have access to important 
corporate information when it would be of greatest benefit to them.

[[Page 19925]]

    Under current regulations, information about the relationship 
between executive compensation and company securities performance, the 
extent to which management's economic interests are aligned with those 
of shareholders through ownership of company equity securities, and 
management's transactions with and relationships to the company beyond 
the scope of employment that could affect management's performance of 
its fiduciary duties must be updated annually in the company's annual 
report on Form 10-K or Form 10-KSB. In addition, information about 
directors' and officers' transactions in company equity securities is 
reportable by the directors and officers under Section 16(a) of the 
Exchange Act within 10 days after the close of the month in which the 
reportable transaction occurs or, in some instances, within 45 days 
after a company's fiscal year end.
    Technological developments that have significantly reduced 
timeframes for the capture and analysis of information necessitate a 
new consideration of the timing of mandated disclosure to the markets. 
The proposed amendment would add a new item, Item 10, to Form 8-K. Item 
10 would require companies with a class of equity securities registered 
under Section 12 of the Exchange Act to disclose certain information 
about directors' and executive officer's transactions in company equity 
securities (including derivative securities transactions and 
transactions with the company), directors' and executive officers' 
arrangements for the purchase or sale of company equity securities 
intended to satisfy the affirmative defense conditions of Exchange Act 
Rule 10b5-1, and loans of money to directors and executive officers 
made or guaranteed by a company or its affiliate.
    Generally, current reports of transactions and loans would be due 
within two business days if the event has an aggregate value of 
$100,000 or more. Reports of transactions and loans with a smaller 
aggregate value, grants and awards pursuant to employee benefit plans, 
and Rule 10b5-1 arrangements would be due by the close of business on 
the second business day of the week following the week in which the 
event occurred.

B. Benefits

    Requiring companies to file current reports disclosing information 
about directors' and executive officers' transactions, Rule 10b5-1 
arrangements, and loans (or loan guarantees) by the company or its 
affiliates should enable investors to make investment and voting 
decisions on a more timely and better-informed basis, protect 
investors, and promote fair dealing in company equity securities. 
Current information regarding changes in directors' and executive 
officers' holdings of company equity securities would reveal shifts in 
the alignment between management's and shareholders' economic 
interests. Such current information, particularly with respect to 
derivative securities used for hedging purposes, would disclose 
transactions by directors and executive officers that in effect sever 
the link between executive compensation and company equity securities 
performance.
    Making available current information regarding directors' and 
executive officers' transactions in company equity securities also 
would provide public investors timely disclosure of potentially useful 
information as to management's views of the performance and prospects 
of the company. Many public investors believe that such current 
disclosure is necessary for them to make informed investment 
decisions.\82\
---------------------------------------------------------------------------

    \82\ See n. 27, above.
---------------------------------------------------------------------------

    Similarly, current disclosure that a director or executive officer 
has entered into, modified or terminated a Rule 10b5-1 contract, 
instruction or written plan for the purchase or sale of company equity 
securities would provide public investors with more complete disclosure 
of useful information as to the performance and prospects of the 
company. Finally, current disclosure of loans (and loan guarantees) by 
the company or its affiliates to directors and executive officers would 
inform investors of financial arrangements not generally available to 
shareholders that may result in the receipt of de facto additional 
compensation by the director or executive officer.
    Currently, it is difficult for investors to ascertain whether a 
director or executive officer has engaged in a transaction involving 
company equity securities until 10 days after the end of the month in 
which the transaction occurred or, in some instances, until 45 days 
after the end of the fiscal year in which the transaction occurred. 
Further, currently there are no disclosure requirements with respect to 
Rule 10b5-1 arrangements and loan guarantees, and only limited 
disclosure concerning company loans to directors and executive 
officers. Current disclosure of information about these events would 
enhance investor confidence in the markets. Thus, we believe that the 
proposed amendment will increase market transparency, encouraging 
continued widespread investor participation in our markets, which will 
enhance market efficiency and liquidity. These benefits are difficult 
to quantify, but are viewed by many investors and investor groups as 
significant.

C. Costs

    The proposed amendment would impose additional costs on companies 
with a class of equity securities registered under Section 12 of the 
Exchange Act. Those companies would be required to file additional 
current reports on Form 8-K to disclose information each time a 
director or executive officer engaged in a transaction in company 
equity securities or similar disclosable events. A company would be 
required to compile the relevant information and prepare and file the 
required Form 8-K.
    The proposed amendment also may lead to increased costs for 
companies resulting from new or enhanced systems and procedures for 
disclosure practices. Companies that do not currently assist their 
officers and directors to comply with Section 16(a) of the Exchange Act 
may need to develop practices and procedures for compiling information 
about corporate securities transactions by their directors and 
executive officers. While we believe that many companies already have 
internal procedures for identifying and reporting these transactions, 
some companies would need to institute appropriate procedures. These 
costs are difficult to quantify. We do not have data to quantify the 
cost of implementing, or enhancing and strengthening existing, internal 
monitoring procedures, and we seek your comments and supporting data on 
these costs.
    The required disclosure will provide investors both with new 
information and with an alternative, accelerated, and more readily 
accessible source for currently available information. Because the size 
and scope of compliance is likely to vary among companies, it is 
difficult to provide an accurate cost estimate with which all parties 
will agree. We believe that a company's internal professional staff 
will expend approximately 75% of the burden hours associated with 
compliance and that the remaining 25% will be expended by outside 
counsel. Assuming a cost of $85.00 per hour for in-house professional 
staff and $300.00 per hour for outside counsel, we believe that the 
total cost will be approximately $416.00

[[Page 19926]]

per filing.\83\ For purposes of the PRA we estimated that there will be 
approximately 215,255 Item 10 Form 8-K reports filed each year.\84\ 
Thus, based on these assumptions, the aggregate cost of the proposed 
amendments will be approximately $89,546,000 each year.
---------------------------------------------------------------------------

    \83\ (Three hours per response  x  75%  x  $85.00 = $191.25) + 
(three hours per response  x  25%  x  $300.00 = $225.00).
    \84\ See n. 76 above and the accompanying text.
---------------------------------------------------------------------------

D. Request for Comments

    Throughout this release we have solicited comment on variations to 
this proposal that would alter the scope of the proposal, including the 
affected parties and the burdens placed on them. We request comment on 
all aspects of this cost-benefit analysis, including identification of 
any additional costs or benefits of, or suggested alternatives to, the 
proposed amendment. Commenters are requested to provide empirical data 
and other factual support for their views to the extent possible.

VIII. Initial Regulatory Flexibility Analysis

    This Initial Regulatory Flexibility Analysis, or IRFA, has been 
prepared in accordance with the Regulatory Flexibility Act.\85\ This 
IRFA involves a proposed amendment to Form 8-K that would expand the 
disclosure requirements with respect to directors' and executive 
officers' transactions in company equity securities and certain similar 
events. Specifically, the proposed amendment would add a new item, Item 
10, to Form 8-K. Item 10 would require companies with a class of equity 
securities registered under Section 12 of the Exchange Act to disclose 
information about directors' and executive officers' transactions in 
company equity securities (including derivative securities transactions 
and transactions with the company), directors' and executive officers' 
arrangements for the purchase or sale of company equity securities 
intended to satisfy the affirmative defense conditions of Exchange Act 
Rule 10b5-1, and loans of money to directors and executive officers 
made or guaranteed by a company or its affiliates.
---------------------------------------------------------------------------

    \85\ 5 U.S.C. 603.
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, Proposed Amendment

    The proposed amendment addresses investor concerns about a lack of 
timely access to information about directors' and executive officers' 
transactions involving company equity securities, and other events 
relating to the market for company equity securities, the relationship 
between executive compensation and company securities performance and 
the relationship between management and the company. These concerns may 
be especially acute for investors in small entities, where this 
information may be difficult to obtain. Advances in technology and the 
increased dependence on the ready availability of current corporate 
information have reshaped the way our markets operate. The proposed 
amendment enhances rapid access to this information, thereby protecting 
investors by enabling them to make informed investment decisions and 
promoting fair dealing in a company's equity securities. By addressing 
these issues, the proposed amendment would enhance investor confidence 
in the fairness and integrity of the securities markets.

B. Legal Basis

    We are proposing the amendment to Form 8-K under the authority set 
forth in Sections 12, 13(a), 15(d), and 23(a) of the Exchange Act. 
Related amendment to Securities Act Rule 144 and Securities Act Forms 
S-2, S-3, and S-8 are proposed under the authority set forth in 
Sections 3(b) and 19(a) of the Securities Act.

C. Small Entities Subject to the Proposed Amendment

    The proposed amendments would affect companies that have a class of 
equity securities registered under Section 12 of the Exchange Act that 
are small businesses. Exchange Act Rule 0-10(a)\86\ defines the term 
``small business'' to be an issuer that, on the last day of its most 
recent fiscal year, has total assets of $5 million or less.\87\ We 
estimate that there are approximately 2,500 companies subject to the 
reporting requirements of Section 13 of the Exchange Act that have 
assets of $5 million or less.\88\ We further estimate that 
approximately 1,800 of these companies have a class of equity security 
registered under Section 12 of the Exchange Act.\89\
---------------------------------------------------------------------------

    \86\ 17 CFR 240.0-10(a).
    \87\ A similar definition is provided under Securities Act Rule 
157 [17 CFR 230.157].
    \88\ This estimate is based on filings with the Commission.
    \89\ This estimate is based on a comparison of the number of 
issuers that filed annual reports on Form 10-K (10,381) and 10-KSB 
(3,641) during the 2001 fiscal year and the number of issuers that 
filed proxy (9,892) or information (253) statements during the 2001 
fiscal year.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping and Other Compliance Requirements

    The proposed amendment would impose new reporting requirements by 
requiring the filing of an Item 10 Form 8-K by all companies with a 
class of equity securities registered under Section 12 of the Exchange 
Act, including ``small businesses,'' when any of their directors or 
executive officers engage in a transaction involving company equity 
securities or similar disclosable events. Generally, an Item 10 Form 8-
K would be due within two business days following a reportable 
transaction or loan with an aggregate value of $100,000 or more with 
respect to an individual director or executive officer. Transactions 
and loans with a lower dollar value, grants and awards pursuant to 
employee benefit plans, and Rule 10b5-1 arrangements would be 
reportable not later than the close of business on the second business 
day of the week following the event. Consequently, the proposed 
amendment would increase the costs associated with compliance with 
companies' Exchange Act reporting obligations.

E. Duplicative, Overlapping or Conflicting Federal Rules

    We believe that there are no rules that duplicate, overlap or 
conflict with the proposed amendment, except as follows. A significant 
portion of the information that would be reported by a company, 
specifically directors' and executive officers transactions in company 
equity securities, is reportable by directors and officers under 
Section 16(a) of the Exchange Act. However, these reports are filed too 
slowly for the public to obtain the maximum benefit from the 
information disclosed, and are not always readily accessible because 
they need not be filed electronically.\90\ Further, Section 16(a) 
filings do not report two categories of information--directors' and 
executive officers' Rule 10b5-1 arrangements and their receipt of loans 
(or loan guarantees) from the company or its affiliates--that we 
believe are of equal market value and also should be reported on a 
current basis. Currently, information about management indebtedness to 
the company is disclosable by the company annually. However, this 
information also is filed too slowly for the public to obtain the 
maximum benefit from the information disclosed, and does not address 
company (or company affiliate) guarantees of third-party loans.
---------------------------------------------------------------------------

    \90\ With respect to transactions that involve sales, notices of 
proposed sales also may be required on Form 144 [17 CFR 239.144].
---------------------------------------------------------------------------

    We have requested comment whether it would be feasible or desirable 
to permit officers and directors to satisfy their Section 16(a) 
reporting obligations by attaching a Form 4 to the company's Item 10 
Form 8-K reporting the same

[[Page 19927]]

transaction, and whether we should adopt a pilot program in which 
companies could voluntarily enroll to use this procedure. We have 
requested comment whether a company should be able to satisfy its Item 
10 Form 8-K reporting obligation by adding Form 8-K header information 
to an officer's or director's Form 4. We also have requested comment 
whether any portions of current management indebtedness disclosure 
should be rescinded.

F. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider alternatives 
that would accomplish the stated objective, while minimizing adverse 
impact on small entities. In that regard, we are considering the 
following alternatives: (a) Differing compliance or reporting 
requirements that take into account the resources of small entities, 
(b) the clarification, consolidation or simplification of compliance 
and reporting requirements under the rule for small entities, (c) the 
use of performance rather than design standards, and (d) an exemption 
from the coverage of the proposed amendment for small entities.
    The proposed amendment is intended to elicit information that would 
be useful to investors in evaluating the relationship between executive 
compensation and company securities performance, the extent to which 
management's economic interests are aligned with those of shareholders 
through ownership of company equity securities, and management's 
transactions with and relationships to the company beyond the scope of 
employment that could affect management's performance of its fiduciary 
duties.
    We have solicited comment as to whether small business issuers 
should be excluded from the proposed amendment. It is possible, 
however, that different compliance or reporting requirements for small 
entities may not be appropriate because this disclosure is important to 
investors in small, as well as large, entities. Also, it may not be 
feasible to further clarify, consolidate or simplify the proposed 
amendment for small entities because, as contemplated, the proposed 
amendment requires only minimal information about directors' and 
executive officers' transactions in company equity securities. Finally, 
for the reasons just discussed, it may be inconsistent with the 
purposes of the Exchange Act to use performance standards to specify 
different requirements for small entities or to exempt small entities 
from the coverage of the proposed amendment.

G. Request for Comments

    We encourage the submission of comments with respect to any aspect 
of the IRFA. In particular, we request comment on the number of small 
businesses that would be affected by the proposed amendment, the nature 
of the impact, how to quantify the number of small businesses that 
would be affected, and how to quantify the impact of the proposed 
amendment. Commenters are requested to describe the nature of any 
effect and provide empirical data and other factual support for their 
views to the extent possible. These comments will be considered in the 
preparation of the Final Regulatory Flexibility Analysis, if the 
proposed amendment is adopted, and will be placed in the same public 
file as comments on the proposed amendment.

IX. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996, or ``SBREFA,''\91\ we must advise the Office of Management 
and Budget as to whether the proposed amendment constitutes a ``major'' 
rule. Under SBREFA, a rule is considered ``major'' where, if adopted, 
it results or is likely to result in
---------------------------------------------------------------------------

    \91\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note 
to 5 U.S.C. 601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more 
(either in the form of an increase or a decrease);
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    Where a rule is ``major,'' its effectiveness will generally be 
delayed for 60 days pending Congressional review. We request comment on 
the potential impact of the proposed amendment on the economy on an 
annual basis. Commenters are requested to provide empirical data and 
other factual support for their views to the extent possible.

X. Consideration of Burden on Competition

    Section 23(a)(2) of the Exchange Act \92\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act.
---------------------------------------------------------------------------

    \92\ 15 U.S.C. 78w(a).
---------------------------------------------------------------------------

    The proposed amendment is intended to improve the quality and 
timeliness of information available to investors about directors' and 
executive officers' transactions in company equity securities and 
certain related transactions. We do not believe that the proposed 
amendment would impose any burden on competition, except as follows. 
Companies will incur costs in complying with the proposed amendment. 
These costs will include preparation and filing expenses. These costs 
also may include expenses associated with establishing practices and 
procedures to ensure compliance. The proposed amendment may impose a 
significantly disproportionate cost on smaller businesses, thereby 
placing them at a competitive disadvantage. We request comment on 
whether the proposed amendment, if adopted, would impose a burden on 
competition. Commenters are requested to provide empirical data and 
other factual support for their views to the extent possible.

XI. Promotion of Efficiency, Competition and Capital Formation

    Section 3(f) of the Exchange Act \93\ requires us, when engaging in 
rulemaking where we are required to consider or determine whether an 
action is necessary or appropriate in the public interest, to consider, 
in addition to the protection of investors, whether the action will 
promote efficiency, competition and capital formation. The proposed 
amendment is intended to improve the quality and timeliness of 
information available to investors about directors' and executive 
officers' transactions in company equity securities and similar 
disclosable events. We believe that the availability of this 
information to investors should bolster investor confidence in the 
securities markets. Increasing the transparency of director and 
executive officer securities transactions should result in better 
monitoring by investors. This may result in better corporate 
governance, thereby increasing the efficiency of the company. This 
should promote capital formation. In addition, the availability of 
enhanced, more timely disclosure should lead to a more efficient 
market.
---------------------------------------------------------------------------

    \93\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    We do not believe that the proposed amendment would impose any 
burden on competition, except as follows. Companies would incur costs 
in complying with the proposed amendment. These costs will include 
preparation and filing expenses. These

[[Page 19928]]

costs also may include expenses associated with establishing practices 
and procedures to ensure that companies compile information regarding 
reportable events on a timely basis. The proposed amendment may impose 
a significantly disproportionate cost on smaller businesses, thereby 
placing them at a competitive disadvantage. We request comment on 
whether the proposed amendment, if adopted, would promote efficiency, 
competition and capital formation. Commenters are requested to provide 
empirical data and other factual support for their views to the extent 
possible.

XII. Statutory Authority

    The amendments contained in this release are being proposed under 
the authority set forth in Sections 3(b) and 19(a) of the Securities 
Act and Sections 12, 13(a), 15(d) and 23(a) of the Exchange Act.

Text of Proposed Amendments

List of Subjects in 17 CFR Parts 230, 239 and 249

    Securities.

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    1. The general authority citation for Part 230 is revised to read 
as follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77sss, 77z-3, 78c, 78d, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d), 
78mm, 79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30 and 80a-37, unless 
otherwise noted.
* * * * *
    2. The authority citations following Sec. 230.144 are removed.
    3. Section 230.144 is amended by adding a sentence at the end of 
paragraph (c)(1) to read as follows:


Sec. 230.144  Persons deemed not to be engaged in a distribution and 
therefore not underwriters.

* * * * *
    (c) Current public information. * * *
    (1) Filing of reports. * * * For purposes of this paragraph, an 
issuer will be considered as having filed all of the reports required 
to be filed under Section 13 or 15(d) of the Securities Exchange Act of 
1934 (15 U.S.C. 78m and 78o(d)) notwithstanding that the issuer may not 
have timely filed one or more current reports on Form 8-K (Sec. 249.308 
of this chapter) required to be filed solely to disclose the occurrence 
of an event or events specified in Item 10 of the form.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    4. The authority citation for Part 239 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-29, 80a-30 and 80a-37, 
unless otherwise noted.
* * * * *
    5. Section 239.12 is amended by revising paragraph (c) to read as 
follows:


Sec. 239.12  Form S-2, for registration under the Securities Act of 
1933 of securities of certain issuers.

* * * * *
    (c) The registrant:
    (1) Has been subject to the requirements of section 12 or 15(d) of 
the Exchange Act (15 U.S.C. 78l or 78o(d)) and has filed all the 
material required to be filed pursuant to section 13, 14 or 15(d) of 
the Exchange Act (15 U.S.C. 78m, 78n or 78o(d)) for a period of at 
least thirty-six calendar months immediately preceding the filing of 
the registration statement on this Form; and
    (2) Has filed in a timely manner all reports required to be filed 
during the twelve calendar months and any portion of a month 
immediately preceding the filing of the registration statement and, if 
the registrant has used (during the twelve calendar months and any 
portion of a month immediately preceding the filing of the registration 
statement) Sec. 240.12b-25(b) of this chapter under the Exchange Act 
with respect to a report or a portion of a report, that report or 
portion thereof has actually been filed within the time period 
prescribed by that section. For purposes of this paragraph, a 
registrant will be considered as having filed all the material required 
to be filed under section 13 or 15(d) of the Exchange Act and as having 
filed in a timely manner all reports required to be filed 
notwithstanding that the registrant may not have timely filed one or 
more current reports on Form 8-K (Sec. 249.308 of this chapter) 
required to be filed solely to disclose the occurrence of an event or 
events specified in Item 10 of Form 8-K; and
* * * * *
    6. Form S-2 (referenced in Sec. 239.12) is amended by adding a 
sentence at the end of General Instruction I.C to read as follows:


    Note-- The text of Form S-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-2

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

I. Eligibility Requirements for Use of Form S-2

* * * * *
    C. * * * For purposes of (1) and (2) in the preceding sentence, 
a registrant will be considered as having filed all the material 
required to be filed under section 13 or 15(d) and as having filed 
in a timely manner all reports required to be filed notwithstanding 
that the registrant may not have timely filed one or more current 
reports on Form 8--K (Sec. 249.308 of this chapter) required to be 
filed solely to disclose the occurrence of an event or events 
specified in Item 10 of Form 8-K.
* * * * *

    7. The authority citations following Sec. 239.13 are removed.
    8. Section 239.13 is amended by revising paragraph (a)(3) to read 
as follows:


Sec. 239.13  Form S-3, for registration under the Securities Act of 
1933 of securities of certain issuers offered pursuant to certain types 
of transactions.

* * * * *
    (a) Registrant requirements. * * *
    (3) The registrant:
    (i) Has been subject to the requirements of section 12 or 15(d) of 
the Exchange Act (15 U.S.C. 78l or 78o(d)) and has filed all the 
material required to be filed pursuant to sections 13, 14 or 15(d) of 
the Exchange Act (15 U.S.C. 78m, 78n or 78o(d)) for a period of at 
least twelve calendar months immediately preceding the filing of the 
registration statement on this Form; and
    (ii) Has filed in a timely manner all reports required to be filed 
during the twelve calendar months and any portion of a month 
immediately preceding the filing of the registration statement and, if 
the registrant has used (during the twelve calendar months and any 
portion of a month immediately preceding the filing of the registration 
statement) Sec. 240.12b-25(b) of this chapter with respect to a report 
or a portion of a report, that report or portion thereof has actually 
been filed within the time period prescribed by that section. For 
purposes of this paragraph, a registrant will be considered as having 
filed all the material required to be filed under section 13 or 15(d) 
of the Exchange Act and as having filed in a timely manner all reports 
required to be filed notwithstanding that the registrant may not have 
timely filed one or more current reports on Form 8-K (Sec. 249.308 of 
this chapter) required to be filed solely to disclose the occurrence of 
an

[[Page 19929]]

event or events specified in Item 10 of Form 8-K; and
* * * * *
    9. Form S-3 (referenced in Sec. 239.13) is amended by adding a 
sentence at the end of General Instruction I.A.3 to read as follows:

    Note-- The text of Form S-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-3

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

I. Eligibility Requirements for Use of Form S-3

* * * * *

A. Registrant Requirements.

* * * * *
    3. * * * For purposes of (a) and (b) in the preceding sentence, 
a registrant will be considered as having filed all the material 
required to be filed under section 13 or 15(d) of the Exchange Act 
and as having filed in a timely manner all reports required to be 
filed notwithstanding that the registrant may not have timely filed 
one or more current reports on Form 8-K (Sec. 249.308 of this 
chapter) required to be filed solely to disclose the occurrence of 
an event or events specified in Item 10 of Form 8-K.
* * * * *
    10. Section 239.16b is amended by revising the introductory text of 
paragraph (a) to read as follows:


Sec. 239.16b  Form S-8, for registration under the Securities Act of 
1933 of securities to be offered to employees pursuant to employee 
benefit plans.

    (a) Any registrant that, immediately prior to the time of filing a 
registration statement on this form, is subject to the requirement to 
file reports pursuant to sections 13 or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and has filed all 
reports and other materials required to be filed by such requirements 
during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports and materials), may use 
this form for registration under the Securities Act of 1933 (the 
``Act'') of the securities listed in paragraphs (a)(1) and (a)(2) of 
this section. For purposes of this paragraph, a registrant will be 
considered as having filed all reports and other materials required to 
be filed by the requirements of Sections 13 or 15(d) notwithstanding 
that the registrant may not have timely filed one or more current 
reports on Form 8-K (Sec. 249.308 of this chapter) required to be filed 
solely to disclose the occurrence of an event or events specified in 
Item 10 of Form 8-K:
* * * * *
    11. Form S-8 (referenced in Sec. 239.16b) is amended by revising 
the introductory text of General Instruction A.1. to read as follows:

    Note-- The text of Form S-8 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-8

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

A. Rule as to Use of Form S-8

    1. Any registrant that, immediately prior to the time of filing 
a registration statement on this Form, is subject to the requirement 
to file reports pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934 (the ``Exchange Act''), and has filed all 
reports and other materials required to be filed by such 
requirements during the preceding 12 months (or for such shorter 
period that the registrant was required to file such reports and 
materials), may use this Form for registration under the Securities 
Act of 1933 (``Act'') of the securities listed in paragraph 1(a). 
For purposes of this paragraph 1, a registrant will be considered as 
having filed all reports and other materials required to be filed by 
the requirements of Sections 13 or 15(d) of the Exchange Act 
notwithstanding that the registrant may not have timely filed one or 
more current reports on Form 8-K (Sec. 249.308 of this chapter) 
required to be filed solely to disclose the occurrence of an event 
or events specified in Item 10 of Form 8-K:
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    12. The authority citation for Part 249 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.
* * * * *
    13. Form 8-K (referenced in Sec. 249.308) is amended by adding six 
sentences to the end of paragraph 1 of General Instruction B and by 
adding Item 10 under ``Information to Be Included in the Report'' to 
read as follows:

    Note-- The text of Form 8-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

* * * * *

General Instructions

* * * * *

B. Events To Be Reported and Time for Filing of Reports

    1. * * * Item 10 applies only to registrants with a class of 
equity security (as defined in Sec. 240.3a11-1 of this chapter) 
registered under Section 12 of the Act. A registrant must file a 
report of any event specified in paragraphs (a) and (c) of Item 10 
with an aggregate value of $100,000 or more (other than a grant or 
award pursuant to an employee benefit plan) within two business 
days. The registrant must file a report of any grant or award 
pursuant to an employee benefit plan, any event specified in 
paragraphs (a) and (c) of Item 10 with an aggregate value less than 
$100,000, and any event specified in paragraph (b) of Item 10 not 
later than the close of business on the second business day of the 
week following the week in which the event occurred. However, the 
registrant may defer reporting any event specified in paragraphs (a) 
and (c) with an aggregate value not exceeding $10,000 until the 
aggregate cumulative value of those unreported events with respect 
to the same executive officer or director exceeds $10,000. The 
Commission hereby finds that it is not in the public interest to 
impose any sanction on a registrant, notwithstanding a violation, 
that demonstrates that (1) at the time of the violation, it had 
designed procedures and a system for applying such procedures 
sufficient to provide reasonable assurances that Item 10 events are 
timely reported, (2) at the time of the violation, the registrant 
followed those procedures, and (3) as promptly as reasonably 
practicable, the registrant made a filing to correct any violation.
* * * * *

Information To Be Included in the Report

* * * * *

Item 10. Transactions by Directors and Executive Officers

    (a)(1) If a director or executive officer (as defined in 
Sec. 240.3b-7 of this chapter) of the registrant acquires or 
disposes of any equity security (as defined in Sec. 240.3a11-1 of 
this chapter) of the registrant, other than a derivative security 
(as defined in Instruction 1 to this Item), whether or not of a 
class registered under Section 12 of the Exchange Act, the 
registrant must report with respect to each transaction:
    (i) The name and title of the director or executive officer;
    (ii) The date of the transaction;
    (iii) The title and number of securities acquired or disposed 
of;
    (iv) The per share acquisition or disposition price, if any;
    (v) The aggregate value of the transaction;
    (vi) The nature of the transaction (e.g., open market sale or 
purchase, sale to or purchase from the registrant, gift); and
    (vii) Any other material information regarding the transaction.
    (2) If a director or executive officer of the registrant 
acquires or disposes of any derivative security (as defined in 
Instruction 1 to this Item) with respect to the registrant, whether 
or not issued by the registrant, the registrant must report with 
respect to each transaction:

[[Page 19930]]

    (i) The name and title of the director or executive officer;
    (ii) The date of the transaction;
    (iii) The number of derivative securities acquired or disposed 
of;
    (iv) The per share exercise or conversion price (or other price, 
such as a notional price, used in the terms of the derivative 
security);
    (v) The price, if any, the executive officer or director paid or 
received for the derivative security;
    (vi) The date(s) on which each derivative security becomes 
exercisable (or subject to termination) and its date of expiration 
(or final termination);
    (vii) The title and number of underlying securities (or cash 
equivalent) that would be acquired or disposed of upon exercise, 
conversion, termination, or settlement;
    (viii) The nature of the transaction (e.g., option grant, sale 
or purchase of call option, sale or purchase of put option, entering 
into a swap or futures contract). If the transaction involves a 
collar or other hedge, the registrant must so indicate and describe 
all material terms; and
    (ix) Any other material information regarding the transaction, 
including contingencies applicable to exercise.
    (3) If a director or executive officer of the registrant 
exercises, converts, terminates or settles any derivative security 
(as defined in Instruction 1 to this Item) with respect to the 
registrant, the registrant must report with respect to each 
transaction:
    (i) The name and title of the director or executive officer;
    (ii) The date of the exercise, conversion, termination or 
settlement;
    (iii) The per share price used for exercise, conversion, 
termination or settlement;
    (iv) The title and number of underlying shares (or cash 
equivalent) acquired or disposed of;
    (v) The nature of the transaction (e.g., exercise of option, 
settlement of swap agreement). If the transaction involves a collar 
or other hedge, the registrant shall so indicate and describe all 
material terms; and
    (vi) Any other material information regarding the transaction.
    (b)(1) If a director or executive officer of the registrant 
enters into any contract, instruction or written plan for the 
purchase or sale of equity securities of the registrant (including 
derivative securities as defined in Instruction 1 to this Item) 
intended to satisfy the affirmative defense conditions of 
Sec. 240.10b5-1(c) of this chapter, the registrant must report:
    (i) The name and title of the director or executive officer;
    (ii) The date on which the director or executive officer entered 
into the contract, instruction or written plan; and
    (iii) A description of the contract, instruction or written 
plan, including its duration, the aggregate number of securities to 
be purchased or sold, and the name of the counterparty or agent.
    (2) If a director or executive officer of the registrant 
terminates or modifies any contract, instruction or written plan for 
the purchase or sale of equity securities of the registrant 
(including derivative securities as defined in Instruction 1 to this 
Item) intended to satisfy the affirmative defense conditions of 
Sec. 240.10b5-1(c) of this chapter, the registrant must report:
    (i) The name and title of the director or executive officer;
    (ii) The date on which the director or executive officer 
terminated or modified the contract, instruction or written plan; 
and
    (iii) A description of the modification to the contract, 
instruction or written plan, including any modification to its 
duration, the aggregate number of securities to be purchased or 
sold, the interval at which securities are to be purchased or sold, 
the number of securities to be purchased or sold in each interval, 
the price at which securities are to be purchased or sold, and the 
identity of the counterparty or agent.
    (c)(1) If the registrant or an affiliate of the registrant 
agrees to lend or lends money to a director or executive officer of 
the registrant, or enters into a guarantee or similar arrangement in 
favor of another person who agrees to lend or lends money to the 
director or executive officer, the registrant must report:
    (i) The name and title of the director or executive officer;
    (ii) The date of each such agreement (or guarantee or similar 
arrangement) or loan thereunder;
    (iii) The dollar amount and other material terms of the 
agreement or loan, and, if applicable guarantee or similar 
arrangement, including the interest rate, terms of repayment, and 
any provisions with respect to forgiveness;
    (iv) The number and class of any registrant securities pledged 
as collateral; and
    (v) The material terms of any pledge, including whether it is 
made with or without recourse.
    (2) If any loan described in paragraph (c)(1) to this Item is 
forgiven, if the registrant or its affiliate makes payment on its 
guarantee or similar arrangement, or if any collateral is foreclosed 
upon, the registrant must report:
    (i) The name and title of the director or executive officer; and
    (ii) The date on which the forgiveness, payment or foreclosure 
occurred, and the dollar amount of forgiveness or payment and the 
number and class of any securities foreclosed upon.

Instructions.

    1. For purposes of this Item, ``derivative security'' includes 
instruments defined as ``derivative securities'' in Sec. 240.16a-
1(c), as well as rights with a value derived from the value of an 
equity security that have an exercise or conversion privilege at a 
price that is not fixed.
    2. The registrant's disclosure obligations under paragraph (a) 
of this Item apply to any transaction in which the director or 
executive officer has a pecuniary interest, as defined in 
Sec. 240.16a-1(a)(2)(i), other than transactions that satisfy the 
exemptive conditions of Sec. 240.16a-2(d), Sec. 240.16a-
3(f)(1)(i)(B), Sec. 240.16a-9, Sec. 240.16a-11, Sec. 240.16a-12, 
Sec. 240.16a-13, Sec. 240.16b-7, and Sec. 240.16b-8 of this chapter, 
and transfers by will or the laws of descent and distribution. The 
registrant is not required to disclose trust transactions that the 
director or executive officer is not required to report pursuant to 
Sec. 240.16a-8.
    3. The disclosure obligations of paragraph (b) of this Item 
apply to any contract, instruction or written plan for the purchase 
or sale of equity securities of the registrant in which the director 
or executive officer has a pecuniary interest, as defined in 
Sec. 240.16a-1(a)(2)(i), other than a director's or executive 
officer's enrollment in a broad-based employee benefit plan for the 
acquisition of registrant equity securities through payroll 
deduction. However, paragraph (a) disclosure is required of 
transactions in these plans that are volitional intra-plan transfers 
involving an issuer equity securities fund, or a cash distribution 
funded by a volitional disposition of an issuer equity security, 
unless the transaction is made in connection with the director's or 
executive officer's death, disability, retirement or termination of 
employment, or is required to be made available to plan participants 
pursuant to the Internal Revenue Code.

    Dated: April 12, 2002.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-9455 Filed 4-22-02; 8:45 am]
BILLING CODE 8010-01-U